Liberty Media Tracking Stocks Gain on Splitoff Plan

Two of Liberty Media Corp.’s tracking stocks rose after the company moved to simplify its complex financial structure by announcing plans to turn its largest unit, Liberty Interactive (LINTA), into an asset-backed stock.

An asset-backed Liberty Interactive, which houses home-shopping network QVC, provides better transparency for the company’s business, improves its ability to raise capital and may help with acquisitions using stock, Chief Executive Officer Greg Maffei said today on a conference call. Liberty Media will split off Liberty Capital and Liberty Starz tracking stocks, to complete the transaction.

Liberty Media, controlled by media mogul John Malone, has used tracking stocks and convoluted financial transactions to pursue tax benefits, said Barton Crockett, an analyst at Lazard Capital Markets Ltd. in New York. The spinoff is the first step in cleaning up the Englewood, Colorado-based company’s structure and making it more attractive to investors, Crockett said. Asset-backed stocks provide more transparency than tracking stocks, he said.

“This spin is a very complicated step to make a very complicated story simpler, which is a good thing,” Crockett said. “I wouldn’t be surprised if after this, the company cues up Liberty Capital and Liberty Starz into their own asset-backed stocks.”

Liberty Interactive rose 21 cents to $12.56 at 4 p.m. New York time in Nasdaq Stock Market trading. Liberty Capital added $2.17, or 5.2 percent, to $43.95. Liberty Starz fell 7 cents to $52.35.

HSN Acquisition?

The transaction gives Liberty Interactive more freedom to pursue acquisitions and helps remove its trading discount, said Chris Marangi, an analyst at Gabelli & Co. in Rye, New York.

Liberty Interactive, which some investors have speculated may buy out HSN, another home-shopping network, now has the option to make the purchase with stock, Marangi said. Liberty Interactive owns a 32 percent stake in HSN, according to data compiled by Bloomberg.

Liberty Interactive considers HSN a good strategic asset for the company in the long term, said Maffei. However, a more attractive use of Liberty Interactive’s capital today would be to repurchase its own shares because they trade at a discount, he said.

“We have no plan or intention to do anything other than keep our options open,” said Maffei on the company’s conference call today. “Investing further in HSN, and I put it lastly, is an opportunity at the right time and price, which we don’t anticipate being today.”

Mia Carbonell, a spokeswoman for HSN, declined comment.

To contact the reporter responsible for this story: Kelly Riddell in Washington at kriddell1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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