Liberty Interactive Corporation (to be renamed Qurate Retail
Group, Inc., but herein referred to as “LIC”) (Nasdaq: QVCA /
QRTEA, QVCB / QRTEB) and GCI Liberty, Inc. (“GCI Liberty”) (Nasdaq:
GLIBA, GLIBP) announced the completion of LIC’s previously
announced acquisition of GCI Liberty (formerly General
Communication, Inc. or GCI) and series of transactions that
effected the split-off of GCI Liberty.
“We are pleased to complete the acquisition of GCI and
subsequent split-off of GCI Liberty. GCI has made significant
investments over the past 30 years to build a state of the art
network for Alaska, and we welcome the team and look forward to its
continued success as part of the Liberty family,” said Greg Maffei,
GCI Liberty President and CEO. “With GCI Liberty and Qurate now
trading as asset-backed stocks, we believe this better highlights
the value of their underlying assets.”
“This transaction is a win for our shareholders, customers, and
employees. As part of a larger company, GCI will be even better
positioned to compete, innovate, and serve Alaskans and our
customers nationwide,” said Ron Duncan, CEO of GCI. “I am deeply
proud of the contributions that GCI employees have made, and will
make, to Alaska’s development as the 49th state. All of us at
GCI are grateful for our customers’ support over the years, and we
will continue to work hard to retain that support in the years
ahead.”
After market close on March 8, 2018, LIC’s board of directors
approved the previously announced reattribution of certain assets
and liabilities from LIC’s Liberty Ventures Group to its QVC Group,
which was effective immediately. In the reattribution, certain
assets and liabilities of the Liberty Ventures Group were
reattributed to the QVC Group based on closing prices on March 8th
(as applicable), as detailed below. As previously announced, LIC
intends to rebrand the QVC Group as Qurate Retail
Group after closing, with the formal name change to
follow.
Assets: (approximate
value $1,912m)
- Cash ($1,048m)(1)
- ILG ($475m after-tax)(2)
- FTD ($122m after-tax)(2)
- Private assets(3) ($83m)
- Green Energy Investments ($172m)
- Tax benefits – stock options
($12m)
Liabilities: (approximate
value $1,912m)
- Exchangeable Debentures
- 1.75% debentures (defined below)
($583m)(4)
- Remaining Exchangeables(5)
Earlier today, LIC contributed to GCI Liberty the remaining
assets and liabilities attributed to its Liberty Ventures Group
following the reattribution in exchange for newly-issued shares of
GCI Liberty Class A common stock (“GLIBA”) and Class B common stock
(“GLIBB”), representing a controlling interest in GCI Liberty, upon
which GCI Liberty became a subsidiary of LIC.
After the contribution, at 4:01 p.m., New York City time, LIC
effected a tax-free separation of its controlling interest in GCI
Liberty by redeeming each outstanding share of its Series A Liberty
Ventures common stock (“LVNTA”) and Series B Liberty Ventures
common stock (“LVNTB”) for one share of GLIBA and GLIBB,
respectively (the “split-off”).
The reattribution, contribution and split-off follow the
previously announced automatic conversion of each outstanding share
of GCI Liberty’s former Class A-1 common stock and Class B-1 common
stock into 0.63 of a share of GLIBA and 0.2 of a share of its
Series A Cumulative Redeemable Preferred Stock (“GLIBP”), which
occurred on March 8th. GLIBP shares have a 21-year term, $25 per
share liquidation preference and 1/3 vote per share with no
conversion feature. GLIBP shares have a 5% initial dividend rate
that increases to 7% upon the reincorporation of GCI Liberty in
Delaware, which is expected to be completed as soon as practical
after closing.
As a result of the transactions, LIC no longer holds an equity
interest in GCI Liberty. Following the split-off, there are
approximately 105 million shares of GLIBA, 4.5 million shares of
GLIBB, and 7.3 million shares of GLIBP outstanding, and former
Liberty Ventures stockholders hold approximately 79% of the common
equity of GCI Liberty and an approximate 83% voting interest in GCI
Liberty based on shares outstanding as of closing.
After giving effect to the split-off, the assets of GCI Liberty
consist of its subsidiaries GCI and Evite and interests in Liberty
Broadband, Charter and Lending Tree.
Prior to the split-off, GCI under the terms of its stock
appreciation rights agreement with Searchlight ALX, Ltd. (the
“Searchlight SAR”) settled its obligations under the agreement for
approximately $80 million, which was funded using additional
borrowings under GCI’s credit facility. Simultaneous with closing,
GCI Liberty repaid GCI’s $75 million Searchlight Note using cash at
GCI Liberty. Also prior to the split-off, GCI Liberty drew down in
full on a $1 billion margin loan against its 42.7 million Series C
shares of Liberty Broadband Corporation (“LBRDK”). A portion of the
proceeds drawn on the margin loan were distributed to LIC in
connection with the reattribution to be used within one year for
the repurchase of QVC Group stock or to pay down debt.
After giving effect to the transactions, the cash balance at GCI
Liberty is approximately $466 million, based on GCI and Liberty
Ventures Group cash balances as of December 31, 2017, pro-forma for
the $1 billion LBRDK margin loan draw less cash reattributed to the
QVC Group and approximately $75 million of cash used to repay the
Searchlight Note, as discussed above.
As previously announced, LIC’s outstanding 1.75% Charter
exchangeable debentures due 2046 (the "1.75% debentures") were
reattributed to the QVC Group at the closing, together with
approximately $583 million of cash equal to the net present value
of principal and cash interest payments through the put/call date
(October 2023).
Following the split-off, LIC will benefit from an indemnity
obligation from GCI Liberty with respect to any payments made by
LIC in excess of the adjusted principal amount of the debentures to
any holder that exercises its exchange right on or before the
put/call date, less any potential tax benefit to LIC from the
retirement of such debentures at a premium. GCI Liberty is
supporting this obligation with a negative pledge in favor of LIC
on 2.2 million Charter shares at GCI Liberty that are referenced by
the 1.75% debentures. In addition, LIC has agreed to use its
commercially reasonable efforts to repurchase the outstanding
debentures within 6 months following the closing, on terms and
conditions reasonably acceptable to GCI Liberty. GCI Liberty will
reimburse LIC for the difference between the purchase price of the
tendered debentures and the amount of cash delivered in the
reattribution with respect to the tendered debentures, less any
potential tax benefit to LIC from retiring such debentures at a
premium. GCI Liberty's indemnity obligation and the number of
shares subject to the negative pledge will be ratably reduced with
respect to any debentures repurchased by LIC.
GCI Liberty may (but is not required to) complete an offering of
Charter exchangeable debentures, proceeds of which may be used to
reimburse LIC with respect to the aforementioned tender offer. The
amount needed to fund is estimated at approximately $283 million
based on $750 million principal outstanding and the bonds trading
at $116 as of March 8, 2018.
As a result of these transactions, LIC has delisted LVNTA and
LVNTB, and as a result, LVNTA and LVNTB will no longer trade on the
NASDAQ Global Select Market, the QVC Group will cease to function
as a tracking stock and will effectively become a regular common
stock. Beginning on Monday, March 12, 2018, LIC’s Series A and
Series B QVC Group common stock will no longer trade under the
symbols “QVCA” and “QVCB,” respectively, and will begin trading
under the symbols “QRTEA” and “QRTEB,” respectively, in connection
with the rebranding. GCI Liberty’s Class A common stock and
preferred stock are expected to commence trading in the regular way
under the symbols “GLIBA” and “GLIBP,” respectively, on Monday,
March 12th. GCI Liberty intends to cause its Class B common stock
to be quoted on the OTC Markets as soon as practicable following
the closing date. However, LIC and GCI Liberty can give no
assurances as to the timing of the quotation or the symbol under
which GCI Liberty’s Class B common stock will be quoted.
Following the split-off, the assets of LIC (which will become
Qurate Retail Group) consist of its subsidiaries QVC, HSN, zulily,
the Cornerstone Brands, certain green energy investments, interests
in ILG and FTD and other private assets(3). Pro-forma for the
reattribution, the cash balance at LIC is approximately $1.4
billion based on QVC Group’s cash balance as of December 31,
2017.
On March 8, 2018, LIC’s board of directors authorized the
additional repurchase of approximately $700 million of LIC common
stock. The total repurchase authorization for LIC as of January 31,
2018, pro-forma for this new authorization, is approximately $1.3
billion. Additionally, the GCI Liberty board of directors
authorized the repurchase of $650 million of GCI Liberty common
stock, which replaces any previous authorization in place at
GCI.
Forward-Looking Statements
This press release includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements concerning the QVC Group following
the split-off and the trading, listing and quotation of the GCI
Liberty capital stock, the rebranding of LIC and the QVC Group and
related legal change in name, the timing of the proposed
reincorporation of GCI Liberty from Alaska to Delaware and
repurchases of the 1.75% debentures by LIC. These forward-looking
statements involve many risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
by such statements, including, without limitation, the listing and
quotation of GCI Liberty capital stock, the completion of
conditions to the reincorporation, market conditions. These
forward-looking statements speak only as of the date of this press
release, and each of LIC and GCI Liberty expressly disclaims any
obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein to reflect any
change in LIC’s or GCI Liberty’s expectations with regard thereto
or any change in events, conditions or circumstances on which any
such statement is based. Please refer to the publicly filed
documents of LIC and GCI Liberty, including their most recent Forms
10-K, for additional information about LIC and GCI Liberty and
about the risks and uncertainties related to LIC’s and GCI
Liberty’s respective businesses which may affect the statements
made in this press release.
About Liberty Interactive Corporation
(to be renamed Qurate Retail Group)
Qurate Retail Group operates and owns interests in a broad range
of digital commerce businesses. Qurate Retail Group’s businesses
and assets consist of, among other things, its subsidiaries QVC,
Inc., HSN, Inc., and zulily, llc and its interests in ILG and
FTD.
About GCI Liberty, Inc.
GCI Liberty, Inc. (Nasdaq: GLIBA, GLIBP) operates and owns
interests in a broad range of communications businesses. GCI
Liberty’s principal assets consist of its subsidiary GCI and
interests in Charter Communications and Liberty Broadband
Corporation. GCI is the largest communications provider
in Alaska, providing data, wireless, video, voice and managed
services to consumer and business customers
throughout Alaska and nationwide. GCI has delivered
services for nearly 40 years to some of the most remote communities
and in some of the most challenging conditions in North
America. GCI Liberty’s other businesses and assets consist of its
subsidiary Evite and its interest in Lending Tree.
(1) Total reattributed cash of $1,048m includes $583m to be
used towards tender offer for 1.75% debentures reattributed from
Liberty Ventures Group. (2) Represents fair value of investments in
ILG and FTD net of tax. (3) Includes estimated fair value of Sound
Ventures, Quid, Brit+Co and Liberty Israel Venture Fund II. (4)
Represents NPV of principal and cash interest payments through
put/call date (10/2023) as of 3/8/2018. (5) Includes Liberty
Interactive’s 4.00%, 3.75%, 3.50% and 0.75% exchangeable
debentures; based on third party valuation.
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Liberty Interactive Corporation and GCI Liberty,
Inc.Courtnee Chun, 720-875-5420
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