Liberty Still Shopping

Jul 7, 2003  •  Post A Comment

Liberty Media’s decision to purchase Comcast’s 57.5 percent stake in shopping channel QVC for $7.9 billion won’t affect its plans to go after the U.S. entertainment assets of Vivendi Universal, since the company has enough financial firepower on hand to handle both sales and then some, Wall Street analysts said.
“I think Liberty always had it in its mind that it could run these deals at the same time and created a war chest to do just that,” said Ted Henderson, a cable analyst at Stifel Nicolaus in Denver.
Mr. Henderson noted that because Liberty has the option to pay for the stake using any combination of cash, debt and class A stock, the company has enough options on hand to make both purchases easily enough. It is one reason, Mr. Henderson added, he thinks Liberty Chairman John Malone opted to begin unwinding QVC’s joint ownership structure now rather than wait a year.
Also working in Liberty’s favor is that QVC has been profitable-it generated more than $1 billion in revenue in the first quarter-and won’t require much investment from Liberty, allowing it to press ahead with its bid for Universal’s studio, TV production operation and cable channels. “QVC has been a predictable cash generator,” said Matthew Harrigan, a cable analyst at Janco Partners. “It’s not a fixer-upper.”
Having QVC in Mr. Malone’s stable might actually help with the Vivendi acquisition, Mr. Henderson asserted. “Having QVC on its balance sheet makes Liberty an operating company, which, if they get Vivendi, creates opportunities with respect to Barry Diller,” he said.
Mr. Diller’s company, InterActiveCorp (formerly USA Interactive), is majority-owned by Liberty and has among its many properties the Home Shopping Network. Mr. Henderson suggested there could be opportunities to merge QVC and HSN together, which would provide even more flexibility for Liberty.
To purchase QVC, Liberty agreed to pay with either cash, debt, class A Liberty stock or a combination of the three. The details will be worked out in the next few weeks and are subject to a stock purchase agreement entered into by the two companies. Comcast expects to close the sale by the end of the year. “This has been a very difficult decision for Comcast,” said Brian Roberts, CEO and president of Comcast in a statement. “With the opportunity to sell at an attractive valuation in excess of $14 billion, we have the flexibility to improve our already strong financial position and to invest for future growth.”
A Liberty spokesman couldn’t be reached for comment.
Liberty’s move ends a months-long tussle between the two companies over the fate of the channel. Mr. Malone launched the sale process more than three months ago, when he triggered a clause in the joint venture that would unwind the partnership. After the two companies couldn’t agree on the channel’s worth, both hired outside appraisers to value the station.
Comcast had the right of first refusal on the deal and could have bought Liberty out of QVC. Once they passed, Liberty had the right to buy out Comcast, which it has now done.
Mr. Harrigan said Wall Street feel this transaction makes sense for both Liberty and Comcast, which hasn’t expressed nearly as much interest in QVC as Mr. Malone has. The sale frees Philadelphia-based Comcast to focus on its core cable business, which at more than 22 million subscribers makes it the nation’s largest multiple system operator.