(6 May 2009 11:00 pm)

MUMBAI: The DirecTV Group (DTVG) has entered into an agreement with Liberty Media Corp for the combination of DirecTV Group with Liberty Entertainment Inc, a company to be split-off from Liberty Media.

"We are pleased to announce this transaction as it will put the control of DirecTV in the hands of DirecTV shareholders," said DirecTV president and CEO Chase Carey. "The transaction will improve our ability to pursue strategic initiatives that can enhance value for all DirecTV shareholders. We look forward to having the benefit of John Malone's involvement, as a significant shareholder and as chairman of DirecTV's board post-merger."

As a part of the deal, Liberty Media will split-off Liberty Entertainment Inc (LEI), which will hold the majority of the assets and liabilities currently attributed to the Liberty Entertainment group tracking stock. LEI will be comprised of: approximately 54 per cent of the common stock of DirecTV; Liberty Sports Holdings, which owns three regional sports networks (RSNs); a 65 per cent interest in Game Show Network (GSN) and Fun Technologies; approximately $30 million in cash in addition to cash generated by operations after 31 March; and $2 billion in debt.

DirecTV will provide to LEI up to $650 million in funding pursuant to a term loan facility in order to service the LEI debt.

"This transaction clarifies DirecTV's capital structure, reduces its shares outstanding, eliminates stock overhang and arbitrage issues, and provides DirecTV with strategic content businesses," said Liberty president and CEO Greg Maffei. "And this transaction offers value to Liberty's shareholders by eliminating the discount in our tracking stock structure and allowing them to continue to participate directly in the strong performance of DirecTV."

LEI and DTVG will merge with subsidiaries of a newly formed subsidiary of DTVG that will be called DirecTV. As a result of the mergers, DirecTV will become the parent company of DTVG and LEI.

The businesses, assets and liabilities of the Liberty Entertainment group tracking stock not included in the split-off of Liberty Entertainment will continue to be attributed to the Liberty Entertainment group, which will be renamed Liberty Starz. Liberty Starz will consist of Starz Entertainment, 37 per cent of WildBlue, PicksPal, Fanball and approximately $650 million in cash and cash equivalents.