DIRECTV to Eliminate High-Vote Stock Through Recapitalization Transaction
April 06 2010 - 6:09PM
Business Wire
DIRECTV (NASDAQ: DTV) today announced that it has agreed with
Dr. John C. Malone to recapitalize the DIRECTV stock ownership held
by Dr. Malone, his wife and two trusts for the benefit of his
children. Under the terms of the agreement, the Malones will
exchange 21,809,863 shares of Class B common stock of the Company,
which is all of the outstanding Class B shares, for 26,547,627
shares of Class A common stock, resulting in the reduction of the
Malones’ voting interest in DIRECTV from approximately 24.3% to
approximately 3%. As part of the transaction, Dr. Malone will also
resign from the Board of Directors of DIRECTV.
The transaction, when completed, is expected to satisfy a
condition imposed by the Federal Communications Commission (“FCC”)
that dates back to the acquisition by Liberty Media Corporation of
its interest in DIRECTV in February 2008 from News Corp. At that
time, concerns over the potential overlap of DIRECTV’s satellite
business in Puerto Rico, DIRECTV Puerto Rico, and a cable business
operated by Liberty Global, Inc., Liberty Cablevision Puerto Rico,
resulted in an FCC order which required in connection with the
approval of Liberty Media’s acquisition that the attributable
interests connecting DIRECTV Puerto Rico and Liberty Cablevision
Puerto Rico be severed within one year. In connection with the
transaction between Liberty Media and News Corp., DIRECTV received
a capital contribution of $160 million.
The attributable interests identified by the FCC included Dr.
Malone’s position as Chairman of the Board of each of DIRECTV and
Liberty Global, as well as the significant stock ownership by
Liberty Media at that time in DIRECTV and Dr. Malone’s stock
ownership interest in each of Liberty Media and Liberty Global. To
address the FCC condition, in February 2009, DIRECTV placed its
ownership interests in DIRECTV Puerto Rico into a trust managed by
an independent trustee who has been granted the authority, subject
to certain conditions, to divest DIRECTV’s ownership in DIRECTV
Puerto Rico.
The FCC staff recently has advised DIRECTV senior management
that the trust arrangement could not remain in place indefinitely
and was not alone sufficient to comply with the requirements of its
order, primarily because of structural considerations associated
with DIRECTV’s Puerto Rico operations, combined with Dr. Malone’s
continued de facto control of DIRECTV (as determined by the FCC),
through his 24.3% voting interest, continued position as Chairman
of the Board and relationships with certain other DIRECTV board
members. Being so advised, DIRECTV approached Dr. Malone and
initiated discussions of the transaction being announced today. It
is also expected that Greg Maffei, who is President and Chief
Executive Officer of Liberty Media Corporation, and Paul Gould, who
is a member of the Board of Directors of Liberty Global, will also
resign from the board of directors of DIRECTV at the closing of the
transaction. DIRECTV believes that the consummation of the
transaction announced today will sever all attributable interests
in satisfaction of the requirements of the FCC order.
DIRECTV expects that their actions will satisfy the FCC
condition and enable DIRECTV to resume control and retain ownership
of its subsidiary in Puerto Rico. The transaction will also permit
DIRECTV to simplify its capital structure by eliminating the
two-class structure which was put in place in connection with the
transactions with Liberty Media and the Malones which were
completed in November 2009.
In the transaction, all of the Malones’ Class B stock, which
conferred 15 votes per share and represents all outstanding shares
of Class B stock, will be canceled resulting in a single class of
common stock, Class A, outstanding with one vote per share. Closing
of the transaction is subject to FCC approval and other standard
terms and conditions and the parties anticipate that the
transaction will be completed within the next several months.
In commenting on the proposed transaction, Mike White, President
and CEO of DIRECTV, said, “While we will miss John Malone’s
experience, knowledge of our industry and keen business insight, we
believe that this is in the best interests of DIRECTV and its
shareholders. We truly appreciate the service and leadership that
John has provided as Chairman and I believe we are a stronger
company because of John’s involvement.”
Dr. Malone stated, “I’m a big fan of DIRECTV and am pleased to
have contributed to its strong performance over the past two years.
I am pleased that DIRECTV will be able to satisfy the FCC condition
without greater cost to the Company and its shareholders. I believe
that I’m leaving DIRECTV in great shape to take on the competitive
challenges that it is facing and will face in the future. It has an
outstanding senior management team and strong group of directors,
and I look forward to continuing to benefit, as a stockholder, from
its continued growth and industry-leading performance.”
DIRECTV was advised by Centerview Partners LLC and Dr. Malone
was advised by Kern Consulting, LLC.
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,”
“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 DTVLA 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 digital television
service to more than 18.5 million customers in the United States
and over 6.5 million customers in Latin America. DIRECTV sports and
entertainment properties include three regional sports networks
(Northwest, Rocky Mountain and Pittsburgh) as well as a 65 percent
interest in Game Show Network. For more information on DIRECTV,
call 1-800-DIRECTV or visit directv.com.
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