This is one reason why Liberty Media says today that it will spin off its 26% ownership stake in Charter along with other assets in a publicly traded entity to be called Liberty Broadband. John Malone’s company originally planned to have a tracking stock. But the change will offer investors “greater choice, enhanced transparency, [and is] well timed with Charter’s agreements with Comcast,” Liberty CEO Greg Maffei told analysts. Charter will buy 1.4M subs from Comcast and pick up a 33% stake in a new company (temporarily called SpinCo) with 2.5M subs. That will make Charter “first stop for other cable sales,” Maffei says. The dealmaking process will be “made more easy by having a separated Liberty Broadband stock.”
Like most Malone deals, this one is complicated by his efforts to minimize taxes. Investors will receive a fourth of a share in Liberty Broadband for each Liberty Media share they own. They’ll also receive a subscription right to buy a particular class of Liberty Broadband shares. They can buy one of these Series C shares for each share they own in Liberty Media.
Maffei says that Liberty’s agreements with Charter don’t include a non-compete clause. But it’s “unlikely that we would go outside of them in the U.S.” to enter the cable business. “Inside the U.S. they seem to be the best game in town.” Liberty and Charter also can’t raise their stakes in SpinCo for now if they want to keep it tax-free. Maffei says, though that “some day it might be combined with Charter.”