Liberty Capital Could Split Into Two Trackers, With One Bidding For DirecTV

There is a 75% chance that Liberty Capital (LCAPA) buys DirectTV (DTV) within 12 months, according to Citigroup analyst Jason Bazinet. He thinks Liberty could offer $30 a share. Bazinet expects Liberty Capital to create two new tracking stocks to close the gap between Liberty Capital’s market price and net asset value.

He thinks one will hold the company’s passive equity stakes, and the other operating assets, including the company’s stake in DirectTV. He expects that piece, which he calls “OpCo,” to offer to buy DirecTV for $15 in cash plus $15 in OpCo stock.

Bazinet Tuesday raised his rating on DirecTV to Buy, and raised his target price to $30 from $24.

Bazinet also raised his price target on Liberty Capital in anticipation of the split into two tracking stocks - and the acquisition of DirectTV. He upped his target to $144 from $121. But he also warns that without any structural changes, Liberty Capital’s upside is limited; he sees $5 of upside, but also $5 of downside, if the IRS rules against the tax deductibility of non-cash interest.

DTV vs. LCAPA 1-yr chart: