March 30 (Bloomberg) -- Billionaire John Malone's Liberty Media Corp. put its On Command hotel-video unit up for sale and may raise as much as $500 million, people familiar with the company's plans said.

On Command sells pay-per-view movies and video games in more than 1 million rooms in hotels managed by such chains as Starwood Hotels & Resorts Worldwide Inc. and Four Seasons Hotels Inc. Englewood, Colorado-based Liberty acquired a majority stake in On Command when it purchased Ascent Entertainment Group in 2000.

The business may appeal to private-equity firms, which prefer companies with predictable earnings that can be used to finance the debt in a leveraged buyout, said Matthew Harrigan, an analyst at Greenwood Village, Colorado-based Janco Partners Inc.

``That's kind of a manageable private-equity-sized business,'' said Harrigan, who rates Liberty shares ``buy'' and doesn't own them personally. Liberty ``can refocus the capital proceeds on buying businesses that have a better growth profile.'' He values On Command at $480 million.

John Orr, a spokesman for Liberty, didn't return calls seeking comment.

Malone hired Lehman Brothers Holdings Inc. to find a buyer, said the people familiar, who declined to be named because Liberty hasn't said On Command is for sale. Lehman spokeswoman Tasha Pelio declined to comment.

On Command has long-term contracts with hotel-chain customers in the U.S., Canada, Mexico and Spain, as well as on cruise ships. It distributes movies, from releases still in theaters to adult titles, games and other services mainly through set-top boxes connected to hotel-room televisions.

Tracking Stocks

In December 2003, after On Command shares had lost three- quarters of their value in two years, Liberty bought the remaining 26 percent. That transaction valued On Command at about $57 million.

Shares of Liberty rose 2 cents to $8.09 in New York Stock Exchange composite trading yesterday. The stock has dropped 6.3 percent in the past year, while the MSCI U.S. Media index has fallen 6.7 percent.

On Command

Liberty plans to create two tracking stocks in May to boost the share price of some of its holdings. Liberty Interactive will include the QVC home-shopping network and stakes in e- commerce companies such as Barry Diller's IAC/InterActiveCorp.

Liberty Capital, where On Command would stay if a buyer can't be found, will include interests in cable channel Court TV and News Corp., Rupert Murdoch's newspaper and broadcasting company.

Malone, 65, in November hired former Microsoft Corp. Chief Financial Officer Greg Maffei, 45, to serve as chief executive of Liberty and help restructure the company.

Liberty started as the programming arm of Tele- Communications Inc., the cable-service provider that Malone ran for more than 25 years. Malone kept control of Liberty after selling TCI to AT&T Corp. in 1999. He has amassed stakes in more than 30 cable channels and other investments including a 19 percent holding in News Corp.

To contact the reporter on this story: Dana Cimilluca in New York at dcimilluca@bloomberg.net

Last Updated: March 30, 2006 00:03 EST