Liberty Interactive Enters into Agreement to Acquire General Communication, Inc.

Apr 4, 2017  •  Post A Comment

Press release from Liberty and GCI, April 4, 2017:

Liberty Interactive Corporation (“Liberty Interactive”) (Nasdaq: QVCA, QVCB, LVNTA, LVNTB) and General Communication, Inc. (“GCI”) (GNCMA) today announced that they have entered into a definitive agreement (the “Agreement”) whereby Liberty Interactive will acquire GCI through a reorganization in which certain Liberty Ventures Group (“Liberty Ventures”) assets and liabilities will be contributed to GCI in exchange for a controlling interest in GCI. Liberty Interactive will then effect a tax-free separation of its controlling interest in the combined company (to be named GCI Liberty, Inc. (“GCI Liberty”)) to the holders of Liberty Ventures common stock in full redemption of all outstanding shares of such stock.

“We are pleased to announce this transaction with GCI,” said Greg Maffei, Liberty Interactive President and CEO. “GCI is the largest communications provider in Alaska, generates solid cash flow with upside potential and is a strong fit with the largest businesses in Liberty Ventures. This transaction will ultimately create a standalone Liberty Ventures, reducing the tracking stock discount and enabling an asset-backed QVC Group.”

“This transaction with Liberty Interactive brings GCI back full circle, as GCI was part of TCI until 1986. We couldn’t think of a better owner, and look forward to being the largest operating asset within GCI Liberty,” said Ron Duncan, GCI President and CEO. “We will continue to run the company with our focus on providing the best value for Alaska customers, offering opportunities for our employees and investing wisely in the Alaska market.”

Liberty Interactive believes the creation of GCI Liberty will provide the following benefits:

  • Reduce Liberty Ventures tracking stock discount
  • Provide greater flexibility for GCI Liberty to pursue future strategic transactions
  • Produce strong free cash flow allowing for potential stock repurchases
  • Establish a strong currency that will be a more effective tool for management compensation and retention
  • Provide financial flexibility for future borrowings

Liberty Interactive expected to be renamed QVC Group, Inc. Liberty Interactive believes an asset-backed QVC Group will provide the following benefits:

  • Establish leading pure play discovery based retail and eCommerce company
  • Make QVC Group eligible for possible inclusion in stock indices through elimination of tracking stock structure
  • Reduce the tracking stock discount
  • Increase near-term and annual liquidity through reattribution (discussed below) of approximately $329 million(1) of cash and approximately $130 million annual free cash flow from tax savings related to exchangeable bonds that will grow
  • Cash can be used for investments, stock repurchases and debt reduction
  • Establish a strong currency that will be a more effective tool for management compensation and retention and for potential future acquisitions
  • Maintain strong ability and liquidity to service all debt

GCI believes this transaction will provide the following benefits to its shareholders:

  • Provides immediate premium over GCI’s current stock price
  • Continued participation in the growth of the business through equity ownership of GCI Liberty
  • Increased scale and resources to execute on strategy
  • Tax efficient transaction
  • Diversifies business beyond Alaska
  • Increased liquidity with access to resources of larger company

Shareholders of GCI will receive total consideration of $32.50 per share comprised of $27.50 per share in GCI Liberty Class A common stock and $5.00 in newly issued Series A preferred shares, based on a Liberty Ventures reference price of $43.65. The Series A preferred shares will accrue dividends at an initial rate of 5% per annum (which would increase to 7% in connection with a future reincorporation of GCI Liberty in Delaware) and will be redeemable upon the 21st anniversary of the closing. There will be no premium paid on the GCI Class B shares. The transaction represents an undiluted enterprise value for GCI of $2.68 billion and undiluted equity value of $1.12 billion. GCI Liberty will remain an Alaska corporation as of the closing; however, it is currently contemplated that as soon as practicable following the closing, a special meeting of GCI Liberty shareholders will be called for the purpose of voting upon a proposal to reincorporate in Delaware.

Upon completion of the contribution of Liberty Interactive’s entire equity interests in Liberty Broadband, Charter, LendingTree, Inc., together with the Evite operating business and certain other assets and liabilities (including, subject to certain conditions, the FTD Companies, Inc. equity interest), Liberty Interactive will acquire a 77% undiluted equity interest and 84% undiluted voting interest in GCI Liberty, comprised of a number of shares of GCI Liberty Class A common stock and GCI Liberty Class B common stock equal to the number of shares of Liberty Ventures Series A and Series B common stock, respectively, outstanding as of the contribution. Promptly following the contribution, holders of Liberty Ventures common stock will receive one share of the corresponding series of GCI Liberty common stock in redemption for each share of Liberty Ventures stock held at the time of the redemption. As a result, upon completion of the transaction, former GCI shareholders will own 23% of the undiluted equity and 16% of the undiluted voting power of GCI Liberty, and former Liberty Ventures shareholders will own the remaining equity and voting interests in GCI Liberty. GCI Liberty’s Class A common stock, Class B common stock and Series A preferred stock are expected to be listed on The Nasdaq Stock Market under the symbols “GLIBA,” “GLIBB” and “GLIBP,” respectively.

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