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Liberty Interactive simplifies structure with General Communication deal

  • A Liberty Interactive (QVCA +2.4%) deal to buy General Communication (GNCMA +62%) will mean benefits as Liberty Interactive loses its historical tracking stock discount, and narrow Liberty Ventures' (LVNTA +10%) NAV discount, analysts say.
  • Liberty will pay $32.50 in stock to General Communication shareholders, a 58% premium to yesterday's close. That's $27.50/share for shares of the combined GCI Liberty, and $5 in new Series A preferred shares (based on Liberty Ventures reference price of $43.65).
  • GCI Liberty should trade at a lower discount to NAV than current assets do, since it will run as an operating company with a more straightforward capital structure, says Evercore's James Ratcliffe. It also paves the way to consolidate Liberty's stake in Charter Communications (CHTR +1.3%) by combining the new company with Charter.
  • Meanwhile, QVCA will be converted to a regular asset-backed stock, “very helpful for broadening the base of investors who can look at it," says FBR's Barton Crockett, along with losing a tracking-stock discount.
  • Other possible beneficiaries from a simpler Liberty structure? Liberty Sirius (LSXMA +1.4%), Liberty Formula One (FWONA +0.7%). LBTYA +0.6%.
  • Source: Bloomberg

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