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News > Companies
The new TCI -- what's left?
June 24, 1998: 3:55 p.m. ET

New Liberty Media to have $5.5B in cash, and considerable leverage
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NEW YORK (CNNfn) - The $48 billion megadeal between AT&T Corp. and Tele-Communications Inc. turns the cable giant's programming business, Liberty Media Corp., into a formidable buyer with considerable leverage power, top officials said Wednesday.
     Under the complex transaction, Liberty Media will merge with TCI Ventures Group LLC (TCIVA), which represents TCI's telephony and Internet-related businesses. The combined entity subsequently will be acquired by the nation's largest long- distance provider.
     Upon completion of the transaction, the new Liberty Media will have about $5.5 billion in cash at its disposal for deal-making or stock repurchases.
     "We'll clearly have sufficient capital to make sure the equity doesn't trade cheap," said Liberty Media Chairman John Malone.
     "I have not been shy about shrinking equity. If we deem we're undervalued, we will clearly look at that as a corporate opportunity," Malone said during a conference call with investors.
     Additionally, under the terms of the definitive agreement, Liberty Media can borrow up to 25 percent of its market capitalization without affecting AT&T's (T) debt rating. That gives Liberty Media roughly $6 billion in borrowing power.
     Malone declined to comment on the possible investment opportunities.
     "We'll have about 9 months to start figuring it out. It's one of the better problems to have," the top official said.
    
tci logo
Out with the old...

     Still, not every investor -- particular shareholders of TCI Ventures -- appeared comfortable with the terms of the deal. Those investors who own only TCI Ventures will get only half of their holdings in AT&T stock.
     TCI Ventures' shareholders will receive 0.52 share of Liberty Media stock for each TCI Ventures share prior to the conversion into the newly created AT&T tracking stock. The exchange isn't contingent upon the AT&T-TCI transaction and will require separate approval by Liberty Media shareholders.
     Other assets of TCI Ventures -- such as @Home Corp. (ATHM), National Digital Television Center and Western Tele-Communications Inc. -- will be sold to AT&T for $2.5 billion in cash.
     But TCI executives explained that Liberty Media represents more value if kept whole compared with TCI Ventures.
     "It was very unlikely that one buyer would want the whole Ventures assets," Malone replied. "There are four or five major media companies that have expressed interest in acquiring the entirety of Liberty."
     "It's of more value to any buyer," added Robert Bennett, Liberty Media president and chief executive.
    
liberty logo
...in with the new

     In addition to Liberty Media's cable assets --such as Encore/Starz! and Discovery -- the new entity will include ownership of Sprint PCS and TCI International Inc. (TINTA), which represent the cable operations in Western Europe, Central and South America, and Japan.
     Although AT&T and TCI didn't work out how to integrate the TINTA assets, Malone acknowledged that AT&T expressed interest in the overseas operations.
     "We didn't have time to really get into details about [TCI International] but they clearly have an interest," he said.
     "My guess would be we will be exploring alignments there...we certainly are going to explore a restructuring of TINTA," he said.Back to top
     -- by staff writer Robert Liu

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