DIRECTV Completes Merger Transaction with Liberty Media
November 19 2009 - 7:17PM
Business Wire
DIRECTV today announced the successful completion of the
previously announced transactions involving the combination of
DIRECTV Group and Liberty Entertainment, Inc. (LEI), a company
split-off from Liberty Media Corporation. The transactions were
completed following a special meeting of stockholders of The
DIRECTV Group held today.
Special Meeting
The stockholders of DIRECTV Group approved both of the proposals
up for vote at the special meeting. Those proposals related to the
approval of the Agreement and Plan of Merger (dated May 3, 2009) as
amended, by and among Liberty, LEI, DIRECTV Group, DIRECTV and
certain subsidiaries of DIRECTV and the approval of the Voting and
Right of First Refusal Agreement (dated as of May 3, 2009) as
amended, by and among DIRECTV Group, LEI, DIRECTV, John C. Malone
(the Chairman of DIRECTV Group and Liberty), his wife and certain
trusts for the benefit of their children. The final voting results
were approximately 90% for adoption of the Merger Agreement and
approximately 89% for approval of the Malone Agreement.
The proposals were also approved by an overwhelming majority of
the stockholders excluding shares of DIRECTV Group owned by Liberty
and its subsidiaries, the Malones and officers and directors of
Liberty. Liberty Media held a special meeting of stockholders
earlier in the day and also received the necessary approvals for
the transactions.
Description of the
Transactions
In the transactions, Liberty executed a split-off that
resulted in the redemption of 90% of the outstanding shares of both
series of its Liberty Entertainment common stock in exchange for
all of the outstanding shares of two series of common stock of LEI.
The Merger Agreement provided for two mergers that resulted in
DIRECTV Group and LEI becoming wholly-owned subsidiaries of
DIRECTV. In the DIRECTV merger, DIRECTV Group common stockholders
(other than direct or indirect subsidiaries of LEI) received one
share of DIRECTV Class A common stock for each share of common
stock of DIRECTV Group that they owned. In the LEI merger, holders
of outstanding shares of LEI Series A common stock and LEI
Series B common stock (other than LEI or DIRECTV) received a
number of shares of DIRECTV Class A common stock equal to the
LEI exchange ratio for each share of LEI common stock that they
owned. The LEI exchange ratio was equal to 1.11130 shares of
DIRECTV common stock for each share of LEI common stock.
Immediately prior to the mergers, the Malones, pursuant to the
Malone Agreement, exchanged each of their shares of LEI
Series B common stock for a number of shares of DIRECTV
Class B common stock equal to the number of shares of LEI
Series B common stock they owned multiplied by the LEI
exchange ratio. The Malones are the only holders of DIRECTV
Class B common stock and their votes are subject to
limitations imposed by the Malone Agreement. DIRECTV Class B
common stock has fifteen votes per share and certain limited
consent rights and will not be publicly traded, and DIRECTV
Class A common stock has one vote per share and is listed on
the NASDAQ National Market System under the symbol “DTV” and will
begin trading on Friday, November 20, 2009.
As a result of the merger transactions, there will be
approximately 910 million shares of DIRECTV Class A common stock
(NASDAQ:DTV) outstanding when trading begins and approximately 22
million shares of DIRECTV Class B common stock, all of which is
held by the Malones and will not be listed. In addition, stock
options and SARs relating to Liberty Entertainment common stock
were converted into stock options and SARs relating to DIRECTV’s
Class A common stock.
As previously disclosed in the proxy statement and prospectus
sent to stockholders in connection with the stockholder vote on the
Liberty transactions and other public filings, as a result of
completing the Liberty transactions, the Company has assumed, on a
consolidated basis, approximately $2 billion of indebtedness to
Bank of America through its acquisition of Greenlady II, LLC, a
subsidiary of LEI, and also has assumed rights and obligations
connected with the related equity collar securing the debt. The
Company has requested that Bank of America unwind the equity
collar, pursuant to agreed upon market practices. The indebtedness
will be repaid prior to its maturity in various stages in
conjunction with the unwind. The Company will also be responsible
for certain costs due to the early unwind of the various tranches
of the equity collar, the amounts of which will vary depending on
the Company’s stock price during the unwind and other market
factors.
Based on DTV’s closing share price of $31.04 on November 18,
2009, and other preliminary estimates of fair value of the assets
and liabilities of LEI (including the fair value on that date of
the equity collar and the stock based awards), the Company
estimates that it will record an expense of approximately $400
million for the premium to LEI stockholders and costs of the
transactions. This is an estimate and the actual charges will be
disclosed in the Company’s filing on Form 10-K for the year ending
December 31, 2009. Adjustments to the fair values of certain of the
stock based awards and the equity collar, as long as these
instruments remain outstanding, will be recorded in non-operating
earnings in the consolidated statements of operations of the
Company each reporting period. The Company expects that the process
of unwinding the equity collar and the determination of amounts
payable to Bank of America will be completed in the fourth quarter
of this year, depending on market factors and other relevant
considerations.
As a result of the decision by the Company to repay the debt and
to unwind the equity collar, the Company does not intend to
implement a new share repurchase program at this time. Any decision
to implement a share repurchase program will be made based upon
progress made in unwinding the equity collar and other relevant
market conditions.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS
NOTE: This release may include or incorporate by reference
certain statements that we believe are, or may be considered to be,
"forward-looking statements" within the meaning of various
provisions of the Securities Act of 1933 and of the Securities
Exchange Act of 1934. These forward-looking statements generally
can be identified by use of statements that include phrases such as
"believe," "expect," "estimate," "anticipate," "intend," "plan,"
"foresee," "project" or other similar words or phrases. Similarly,
statements that describe our objectives, plans or goals also are
forward-looking statements. All of these forward-looking statements
are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results or from
those expressed or implied by the relevant forward-looking
statement. Such risks and uncertainties include, but are not
limited to: economic conditions; product demand and market
acceptance; ability to simplify aspects of our business model,
improve customer service, create new and desirable programming
content and interactive features, and achieve anticipated economies
of scale; government action; local political or economic
developments in or affecting countries where we have operations,
including political, economic and social uncertainties in many
Latin American countries in which DIRECTV Latin America operates;
foreign currency exchange rates; currency exchange controls;
ability to obtain export licenses; competition; the outcome of
legal proceedings; ability to achieve cost reductions; ability of
third parties to timely perform material contracts; ability to
renew programming contracts under favorable terms; technological
risk; limitations on access to distribution channels; the success
and timeliness of satellite launches; in-orbit performance of
satellites, including technical anomalies; loss of uninsured
satellites; theft of satellite programming signals; and our ability
to access capital to maintain our financial flexibility. We urge
you to consider these factors carefully in evaluating the
forward-looking statements.
About DIRECTV
DIRECTV (NASDAQ:DTV) is the world’s leading provider of digital
television entertainment services. Through its subsidiaries and
affiliated companies in the United States, Brazil, Mexico and other
countries in Latin America, DIRECTV provides satellite television
service to more than 18.4 million customers in the United States
and more than 6 million customers in Latin America. The company
also owns three sports Networks (FSN Northwest, FSN Rocky Mountain
and FSN Pittsburgh) as well as a 65% interest in Game Show
Network.
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