Liberty Interactive (LI) announced Tuesday that it will purchase Alaskan cable operator General Communications, Inc. (GCI) as part of a complex, $1.1 billion transaction that will combine the post-merger entity with Liberty Ventures (LV) while transforming LI’s tracking stock structure into an asset-based equity.
A 2013 spin-off of John Malone’s Liberty Media (LM), LI currently controls two tracking stocks: (1) LV, the holding entity for LI’s cable TV and related assets, and (2) QVC Group, which tracks the value of LI’s HSN and QVC cable shopping networks. In addition to serving 108,000 cable subscribers in Alaska, GCI also ranks as the largest provider of wireline and wireless telephone services to customers in that state. Under the terms of Tuesday’s deal, LI—which will be renamed as the QVC Group at closing—will combine GCI with LV, with GCI stockholders to receive shares of stock in the postmerger entity (to be known as GCI Liberty) valued at $32.50 per share. The combined entity will then be spun off to LV shareholders in a tax-free transaction which, according to LI CEO Greg Maffei, “will ultimately create a standalone [LV], reducing the tracking stock discount and enabling an asset-backed QVC Group.” QVC will hold a 77% equity stake and an 84% voting interest in GCI Liberty at the time of closing, and officials predicted that the elimination of LI’s tracking stock structure will facilitate access to equity markets.
The pact also represents a homecoming of sorts for GCI, which, until 1986, had been a vehicle of LM’s former parent company TCI. Affirming that the transaction “brings GCI back full circle,” Ron Duncan, the President and CEO of GCI, said, “we couldn’t think of a better owner and look forward to being the largest operating asset within GCI Liberty.”