Liberty in Deal to Regain Shares

Liberty Media Corp. has clinched a deal to exchange certain cable programming assets, plus about $545 million in cash, for the roughly 4% of its stock held by Comcast Corp., the nation’s largest cable operator.

The agreement, announced Wednesday, eliminates concern over a possible sale of the shares by Comcast, which didn’t consider its Liberty stake strategic. It also allows Liberty to shed assets, such as its 10% stake in cable network E! Entertainment Television, that had been assigned next to no value by investors.

Under terms of the deal, Englewood, Colo.-based Liberty will acquire 120.3 million shares of its Series A common stock that Philadelphia-based Comcast had acquired as part of the purchase price for its stake in shopping network QVC Inc.

In exchange, Comcast will receive Liberty’s stake in E! Entertainment, its full ownership interest in International Channel Networks, all of Liberty’s rights, benefits and obligations under a contribution agreement with Internet music concern TCI Music, and about $545 million in cash.

Based on Liberty’s closing stock price Tuesday of $8.53 a share, the transaction would total about $1.03 billion.

Liberty and Comcast also said the deal would resolve all litigation regarding the TCI Music contribution agreement, which Comcast inherited as part of its acquisition of AT&T; Broadband in November 2002.

Liberty Class A shares rose 8 cents Wednesday to $8.61 on the New York Stock Exchange. Comcast fell 46 cents to $27.89 on Nasdaq.

Not everyone greeted the deal warmly, however. Standard & Poor’s cut its rating outlook on Liberty to “negative” from “stable,” citing concern that it may make additional share repurchases or take on debt-financed minority stakes that don’t generate cash flow for the company.

Comcast acquired about 217.7 million shares of Liberty in September when Liberty acquired its 57% stake in QVC. The company sold 100 million shares of Liberty stock in December in a block sale.

Comcast no longer holds any Liberty shares, Comcast spokesman Tim Fitzpatrick said.

Liberty began talks with Comcast months ago to obtain the stake. E! Entertainment was a logical asset for the swap, given Comcast’s controlling stake in the cable channel.