NEW YORK (Reuters) - Liberty Media Corp said on Monday it plans to split off the DirecTV Group Inc satellite TV operator into a separate company combined with other media assets.
Liberty, controlled by cable pioneer John Malone, plans to combine the top U.S. satellite TV provider with assets that include Game Show Network, FUN Technologies and three regional sports networks. Liberty owns a 54 percent economic stake in DirecTV.
The new parent company will be called DirecTV Group and still led by current Chief Executive Chase Carey with Malone remaining as chairman of an unchanged board. But Malone will have a 24-percent voting stake in the company reduced from the 48-percent voting stake that Liberty Media previously had.
Carey said it meant DirecTV will now be controlled by its own shareholders for the first time and that Malone's interests will be more closely aligned with those of other DirecTV shareholders.
"At 24 percent it's a very different position from a 48 percent controlling position. It's obviously a very large voice but it's not control," Carey said in an interview.
Liberty acquired its stake in DirecTV in February 2008 in exchange for a stake it held in News Corp
The move, which was expected by Wall Street, helps to resolve a long-standing discount between the market value of DirecTV's Liberty Entertainment tracking stock
Liberty Entertainment's 54-percent stake in DirecTV was worth more than Liberty Entertainment's total market capitalization, allowing many investors to devise arbitrage trading strategies to own DirecTV via the tracking stock.
"This transaction clarifies DirecTV's capital structure, reduces its shares outstanding, eliminates stock overhang and arbitrage issues, and provides DirecTV with strategic content businesses," Liberty Media Chief Executive Greg Maffei said in a statement.
Each shareholder of Liberty Entertainment tracking stock will receive 0.9 of a share of Liberty Entertainment and retain 0.1 of a share of new Liberty Starz tracking stock, which covers its Starz TV assets.
Liberty Starz will consist of Starz Entertainment, 37 percent of satellite broadband operator WildBlue, $650 million in cash and other assets. It is expected to trade under the LSTZA and LSTZB symbols on Nasdaq.
"It's a better deal for Liberty Media than it is for DirecTV," said Thomas Eagan, analyst at Collins Stewart. "John (Malone) not wanting to buy DirecTV got DirecTV to buy him."
Shares in Liberty Media were up 2.8 percent to $25.01 in early afternoon trading, while DirecTV shares were down 4.5 percent to $23.46.
(Reporting by Yinka Adegoke; Editing by Derek Caney and Tim Dobbyn)
