Liberty Media Corp. (LMCA), the holding company controlled by billionaire John Malone, plans to spin off its Starz LLC premium cable channel, making it easier for investors to bet directly on the HBO competitor.
The newly created public company will have about $1.5 billion in debt and an undetermined amount of cash, according to a statement today. The spinoff, expected later this year, will be tax-free to Liberty Media shareholders.
Liberty Media, based in Englewood, Colorado, has used tracking stocks and financial transactions over the years to pursue tax benefits and make its diversified assets more attractive to shareholders. They included the separation of Liberty Interactive (LINTA), owner of the shopping network QVC.
“This transaction will provide better transparency on the Starz operating business,” Chief Executive Officer Greg Maffei said in the statement. The deal also will “create significant liquidity at Liberty Media,” he said.
Like Time Warner Inc. (TWX)’s HBO and CBS Corp.’s Showtime, Starz established itself as a movie channel and expanded into original programming. Its flagship channel had 20.7 million subscribers at the end of the second quarter, Liberty said today. Starz’s shows include “Boss” and “Spartacus,” as well as the short-lived “Party Down,” which gained a cult following. The business also runs the Encore and Movieplex channels.
Starz also had supplied programming to Netflix Inc.’s subscribers, though that partnership expired in February.
After the split, Liberty Media’s assets will still include the Atlanta Braves baseball team, stakes in Sirius XM Radio Inc. (SIRI) and Live Nation Entertainment Inc. (LYV), as well as investments in Barnes & Noble Inc. (BKS), Time Warner and Viacom Inc. (VIAB)
Liberty Media shares rose 2.5 percent to $101.89 at the close in New York. The stock has gained 31 percent this year.
Malone said last month that his effort to take control of Sirius will eventually lead to a spinoff of the largest U.S. satellite-radio company.
“I don’t like conglomerates,” Malone told reporters at the Allen & Co. media conference in Sun Valley, Idaho, saying he prefers to ultimately spin off companies in which he has a stake.
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