Bloomberg News

Liberty Seeks to Speed Up Time Warner Voting Rights

February 22, 2006

John Malone's Liberty Media Corp. wants to speed up the conversion of its 4 percent stake in Time Warner Inc. (TWX:US) to voting shares, a sign Malone may seek a more active role in the world's largest media company.

Liberty, whose cable television channels include QVC, Starz and Encore, asked the U.S. Federal Trade Commission for permission to accelerate the conversion of its stake, valued at $3.1 billion as of Sept. 30, the Englewood, Colorado-based company said today. Liberty said it wants to ``participate actively'' in Time Warner shareholder votes and actions.

Under new Chief Executive Officer Greg Maffei, who was appointed Nov. 9, Liberty said it supports Time Warner management. Time Warner CEO Richard Parsons last week settled a dispute with billionaire investor Carl Icahn, agreeing to increase the New York-based company's share buyback to $20 billion, cut costs and name two independent directors.

``The situation with Icahn wanting to break up Time Warner could have frustrated Liberty, being one of its largest shareholders but not being able to vote on it,'' said April Horace, a Hoefer Arnett analyst in Denver. Horace said Hoefer Arnett doesn't have investment banking business with Liberty.

Liberty `More Active'

``Liberty is starting to take more active roles in its investments,'' said Horace, who doesn't own the shares. She rates Liberty stock a ``strong buy.''

Icahn and three partners, Franklin Mutual Advisers Inc., Jana Partners LP and SAC Capital Advisors LLC, own 3.3 percent of Time Warner stock and options.

Liberty shares fell a penny to $8.22 at 4 p.m. in New York Stock Exchange composite trading. The shares have risen 4.4 percent this year. Time Warner shares fell 21 cents to $17.43 and are little changed this year.

``One should not mistake John Malone for Carl Icahn,'' said Philip Remek, a Guzman & Co. analyst in Coral Gables, Florida.

``Malone's a true manager of media assets, and it looks like Liberty may be interested in a more active role, but it will be through more inside, quiet discussions with Time Warner,'' said Remek, who rates the shares ``perform in line'' and doesn't own any. Guzman doesn't own the shares or have a banking relationship with Liberty.

Time Warner couldn't determine immediately the size of Liberty's stake, Time Warner spokeswoman Susan Duffy said today. Liberty spokesman John Orr said the company holds a 4 percent interest in Time Warner. Time Warner operates the second-largest U.S. cable TV provider.

10-Year Prohibition

In 1997, the FTC prohibited Liberty from converting its equity holding to voting shares for 10 years, Liberty said in a statement today. Liberty said the FTC took that step because Liberty was part of Tele-Communications Inc., then the largest U.S. cable TV company.

Liberty based its request to the FTC on the fact that the company no longer owns any cable TV systems. The company also says on its Web site that it owns interests in Court TV and Discovery Communications Inc. among other programming, and an 18 percent ``voting interest'' in Rupert Murdoch's News Corp.

Liberty doesn't have a particular measure it is interested in voting on among those that are expected to come before Time Warner investors, Orr said. The Time Warner annual meeting is planned for an unspecified date in May, Duffy said.

``We just applied for early termination of the order because we feel the circumstances have changed,'' Orr said in an interview today. He said the company doesn't know how quickly the FTC might act on the request.

FTC Response

FTC spokesman Mitch Katz said he couldn't confirm whether the commission had received Liberty's request for Time Warner voting rights. He said he's unable to comment on when the agency might respond to it.

Separately today, Liberty said it has asked the FTC for permission to buy more shares of IAC/InteractiveCorp (IACI:US) and Expedia Inc. (EXPE:US) IAC spun off online travel reservations company Expedia to shareholders last year.

Both companies have the cash flow to repurchase shares and increase shareholder value, Malone said in a statement today. He said that Liberty has a ``desire to participate in the value creation resulting from strong, leveraged earnings growth.''

Because of the size of its holdings in both companies, Liberty needs FTC clearance to buy more shares, under the Hart- Scott-Rodino antitrust law.

Liberty, in a regulatory filing, valued its investment in IAC at $1.76 billion as of Sept. 30. On its Web site, Liberty says it holds 20 percent of IAC shares, representing 47 percent of the voting stock. It says it gave IAC CEO Barry Diller control of the voting rights in the company that runs Ticketmaster and the Evite and Match.com Internet services.

In the same regulatory filing, Liberty said it held a 21 percent stake in Expedia shares as of Aug. 9. Malone is an Expedia director, while Diller is Expedia's chairman.

To contact the reporter on this story: Kevin Orland in Chicago at korland@bloomberg.net.

To contact the editor responsible for this story: Emma Moody at emoody@bloomberg.net.


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Companies Mentioned

  • TWX
    (Time Warner Inc)
    • $84.49 USD
    • 0.64
    • 0.76%
  • IACI
    (IAC/InterActiveCorp)
    • $69.9 USD
    • 3.14
    • 4.49%
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