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Liberty in $5.5B asset swap
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June 26, 2000: 10:46 a.m. ET
Liberty Media to be largest shareholder in UnitedGlobalCom
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NEW YORK (CNNfn) - Liberty Media Group, the video programming arm of AT&T Corp., will become the largest shareholder in UnitedGlobalCom Inc., the largest broadband cable company outside the United States, in a complex swap of assets valued at $5.5 billion, the companies announced Monday.
The deal will substantially boost UnitedGlobalCom's international distribution and programming assets, especially in Britain. UnitedGlobalCom (UCOMA: Research, Estimates), which has operations in 26 countries, has been trying to expand its presence in Europe, Australia and the rapidly expanding Latin American market. The deal also reshuffles some of the Internet and cable holdings of Liberty Media, run by Chairman John Malone.
Under the deal, Denver, Colo.-based UnitedGlobalCom will give Liberty Media $200 million in cash and 75.3 million shares of its Class B common stock, which doesn't trade publicly. Investment bankers working for UnitedGlobalCom and Liberty valued the Class B stock at $70 per share, implying that the stock portion of the deal is worth $5.3 billion. The companies said that these shares represent 38 percent of the equity but 72 percent of the voting power in UnitedGlobalCom.
The $5.5 billion value on the deal represents more than the sum of the market values of the publicly traded companies UnitedGlobalCom owns, said Robert Bennett, president and CEO of Liberty Media, on a conference call Monday.
In exchange, Liberty Media (LMG.A: Research, Estimates) will give UnitedGlobalCom a 25 percent non-voting stake in Telewest Communications Plc (TWSTY: Research, Estimates), the No. 2 cable TV company in Britain. The stake is worth nearly $3 billion at current market prices.
In addition, Liberty Media will give UnitedGlobalCom Liberty's Latin American broadband interests, a 15 percent stake in Crown Media Holdings, and 20 percent of Premium Movie Partnership, a movie channel joint venture in Australia. Crown Media Holdings, another of Liberty's broadband holdings, distributes Odyssey and the Hallmark Channel.
UnitedGlobalCom's stock rose 4-3/8 to 47-15/16 Monday morning, while Liberty Media stock declined 3/8 to 24-3/8.
UnitedGlobalCom will add Liberty's Latin American broadband interests to its VTR GlobalCom unit, the largest cable television and competitive telephone carrier in Chile. UnitedGlobalCom may do a public offering of its Latin American assets that is similar to its previous public offering in its United Pan-Europe Communications (UPCOY: Research, Estimates) subsidiary, UnitedGlobalCom officials said.
"This to me is déjà vu all over again," said Liberty's Malone, referring to his past business dealings with Gene Schneider, the chairman and CEO of UnitedGlobalCom. Malone and Schneider have known each other for more than 30 years.
In a separate piece of the deal, UnitedGlobalCom will turn around and contribute the interest in Telewest to its United Pan-Europe Communications (UPC) subsidiary in exchange for 128.2 million UPC shares, which will increase UnitedGlobalCom's interest in UPC to about 61 percent.
UPC is Europe's largest broadband cable operator. Bringing together UPC and Telewest would consolidate Microsoft Corp.'s (MSFT: Research, Estimates) interests in the European cable industry. The Redmond, Seattle software firm owns 8 percent of UPC and is in the process of buying 29.9 percent of Telewest.
UPC stock rose 2 percent to  30.10 in Amsterdam on the news, while Telewest (TWT) shares jumped 5 percent to 287 pence in early London trading. UPC recently postponed for the second time plans for an initial public offering of Chello, its high-speed Internet access business, with management preferring to concentrate on "strategic discussions".
The British cable industry has undergone far-reaching consolidation in recent years, leaving Telewest and NTL as the only remaining players of note. Digital broadcasting in Britain is the most advanced in Europe, with several platforms competing for consumers. Alongside broadband cable services, other operators provide digital satellite and land-line offerings.
The transaction will increase UnitedGlobalCom's shares outstanding to about 194 million from 118 million previously. The 194 million number will include 95 million shares of Class B stock, up from 19 million now. 
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