Filed by Liberty Media Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-6 of the Securities Exchange
Act of 1934
Subject Company: Liberty Media Corporation
Commission File No.: 001 - 33982
Excerpts
from the Transcript of the
Liberty
Media Corporation 2010 Annual Meeting of Shareholders
held on
June 24, 2010
QUESTION AND ANSWER
Unidentified
Audience Member
Thank
you I have some questions about structure that I am trying to understand what
these new changes that you are creating
Unidentified
Participant
I
think its every time you ask that question maam
Unidentified
Audience Member
I do this every time. Okay, Starz is being separated out again with a new
person in charge.
Greg
Maffei
Liberty Media Corporation - President, CEO
No,
not exactly.
John
Malone
Liberty Media Corporation - Chairman
.
. . So in this process that was announced a couple of days ago the principal
change that will take place is Liberty Interactive will become a real company
not a fictional company. And it will cease to cross guarantee its liabilities
with the other two tracking stock companies. That is the principal thing that
has happened.
So
that implicit guarantee, or explicit guarantee in effect that while we are all
living together in the same house we basically all owe the mortgage. Even
though we have agreed amongst ourselves that you pay the mortgage payments, we
are still on the hook as we sit today. Once this takes place thats the
principal thing that gets severed from a conceptual point of view.
Now,
Greg can get into the reasons why this is an important thing to do. And part of
the continuing progress of helping our shareholders realize value in the
business is in helping the businesses that we are in grow and focus on their
businesses.
Unidentified
Audience Member
Okay
let me ask because let me just clarify slightly different from what I
grasped. I understand Liberty Interactive is spinning-off like
1
John
Malone
Liberty Media Corporation - Chairman
Actually
Greg
Maffei
Liberty Media Corporation - President, CEO
Technically,
we are spinning-off the other two from Liberty Interactive. It has the same
effect, but there is a technical matter.
Unidentified
Audience Member
Okay.
What I thought Liberty Starz was so Liberty Starz is still going to be
sitting under Liberty Media?
Greg
Maffei
Liberty Media Corporation - President, CEO
Now
you noted we have a new CEO for Starz.
Unidentified
Audience Member
Yes.
Greg
Maffei
Liberty Media Corporation - President, CEO
And
that (inaudible) beginning in January with Chris Albrecht who used to run
HBO, is now running Starz. We are very excited about Chris and what he can do
to help us build the source business particularly around original programming,
around what its niche will be in the long-term. Pay channels are evolving,
movies (inaudible) Chris is very aware of all these things and we have a lot of
excitement around what he can do with Starz. I think the industry has a lot of
excitement about that.
But
that doesnt affect thats about the operating business I think he will do
great. But, that doesnt affect Liberty Starz the tracking stock. We hope
that ultimately affects the stock price through good performance, but it doesnt
affect the structure in any way.
John
Malone
Liberty Media Corporation - Chairman
Now
there is one, Sports Interactive that is still sitting with Starz.
Greg
Maffei
Liberty Media Corporation - President, CEO
We
have a small business that probably shouldve gone with DIRECTV fit better.
Its online sports business, its about its a very small business that,
frankly, should probably fit better with DIRECTV and the merger should probably
gone with them, but candidly they werent going to pay us anything, so we kept
it.
John
Malone
Liberty Media Corporation - Chairman
There
was a much better financial deal for us to keep it than to give it to them for
nothing.
Greg
Maffei
Liberty Media Corporation - President, CEO
Say
take it, then we will pay you nothing or you can keep it. And we said, okay we
will keep it. Even though in our judgment it probably would have fit
strategically operationally fit better with what they have going on in sports
the regional sports networks, what they do with fantasy, a lot of things, so
be it. Albeit they didnt do it, now we have it. Its a small business I mean
its tiny. Not material to the overall even Starz level.
2
John
Malone
Liberty Media Corporation - Chairman
It
has more tax implications than it does value implications.
Unidentified
Audience Member
Okay.
Greg
Maffei
Liberty Media Corporation - President, CEO
What
John is referring to is it has a very high tax basis relative to what its
actually worth.
Unidentified
Audience Member
Yes.
Greg
Maffei
Liberty Media Corporation - President, CEO
So
we may somewhere down the road trigger why we found it attractive if the
business is successful, great. If its not successful we can trigger a large
tax loss. We have lots of embedded taxable gains that would offset that.
Unidentified
Audience Member
Now
Liberty Interactive, has better that already begun or when does that begin?
John
Malone
Liberty Media Corporation - Chairman
That
process the Board of Directors, as we announced Monday has approved a plan to
proceed with that but there are many details still to be worked. Primarily
around probably our biggest is in terms of deciding is how we handle one
tranche of debt that was issued by Liberty Media, the actual corporation as
John knows put aside the fiction of the tracking stocks. The actual corporation
with Liberty Media LLC as an indenture all our debt is issued by that.
So
it must all that is going to go with Liberty Interactive from a legal
perspective. We had previously attributed that debt, the liability, to Liberty
Capital. So, you cant send Liberty Capital out with that debt because
technically the issuer is Liberty Media LLC.
So,
we need to either offer the bondholders an opportunity to move over to Liberty
Media to Liberty Capital and they can choose; we cant force them. Or, to
agree they dont move and there are other variations in between, we need to compensate
Liberty Interactive before taking the debt on. Because it has already than a
liability to Liberty Capital in a tracking stock and its attributed to Liberty
Capital, but not actually issued by Liberty Capital.
So,
whatever degree gets left behind roughly its about, I think 1.1 billion
of this stuff, Liberty Capital is going to owe Liberty Interactive 1.1 billion,
one way or another to compensate. Or, it is going to have to take the debt on
one of the two. Or, it can reallocate the assets back to Liberty Interactive
that underlie the debt. So, there is lots of options here. And the tax and
legal departments and the accounting department are all wrangling over what
they advise the Board is the best way to resolve this open issue.
Greg
Maffei
Liberty Media Corporation - President, CEO
So,
that is one open issue. But then as a practical matter to complete this split
off that the Board has only approved the plan of, there will need to be a final
plan which incorporates details like that. Will need to have the IRS approved
it. We will need to have an SEC document out there that gets voted on by the
shareholders, and the shareholders approve it. There will be regulatory changes
around licenses with the SEC. So it is a long process that say maybe Q4 of this
year, maybe Q1 of next year.
3
Unidentified
Audience Member
Thank
you very much.
Unidentified
Audience
If
the economy does double dip again, (inaudible) you have already got that $500
million fund it is hard to see that instant gratification (inaudible) happening
again. But can you talk about the three new entities that you have, and what
you (inaudible) you feel you might have for M&A? I know you look at
everything even at some of the wounded dogs like MGM. But is it possible
(inaudible) could engage in significant activity, or will most of the fun stuff
still be concentrated at Liberty Capital?
Greg
Maffei
Liberty Media Corporation - President, CEO
I
think if you look at the three entities, LINTA has a great long-term capital
structure and it will generate a lot of free cash flow. But it has the lowest
amount of [current] cash flow and liquidity and it also has the most business
focus. So, it is unlikely it will have a big happy hunting ground, look at a
lot of things.
John
Malone
Liberty Media Corporation - Chairman
Other
than the monetization of some non-strategic investments.
Greg
Maffei
Liberty Media Corporation - President, CEO
Which
could generate cash flow.
John
Malone
Liberty Media Corporation - Chairman
So
it has about $2 billion of non-strategic assets, that it could monetize if it
sees an opportunity that it prefers.
Greg
Maffei
Liberty Media Corporation - President, CEO
But
I think its not going to be out there looking at the MGM opportunities or the
next Sirius. Its more likely that it does something it will be around
e-commerce where its had some acquisitions around opening continuing
investment of QVC business both domestically or internationally. We are opening
in Italy in October/November. And also potentially looking at we have a
good-sized ownership position in HSN.
Could
that increase over time? No current plans. And frankly, given the price I would
rather buy back more of Liberty Interactive stock. But those are the three or
four areas I think Liberty Interactive would do. The other two companies have a
lot of liquidity relative to their capital sizes. Liberty Capital has a lot of
cash and Liberty Starz has a lot of borrowing power as well as cash.
So
I think both of them are more likely to have freedom of thinking about broader
things just because they have less focused businesses. And particularly,
capital has the less focused business. We really have a good-sized investment
in Sirius, a good size investment in Live Nation and then a whole lot of other
cats and dogs that probably over time we seek liquidity on, and are not part of
the longer-term capital structure. So, its part of the place.
Unidentified
Audience Member
Two
questions. The first question, is it safe to assume that Mr. Maffei will
be running the newco as President and CEO? And second question would be in
regards to
4
Greg
Maffei
Liberty Media Corporation - President, CEO
I
will let him answer that.
Unidentified
Audience Member
What
is the strategic reason for keeping Liberty Starz and LCAPA together? Why not
separate them?
John
Malone
Liberty Media Corporation - Chairman
Let
me give the first. Yes, the current plan is for essentially most of the
management function of all the operating left within the separated entities to
continue to be managed by the existing management. So, Greg would wear two hats
and be CEO of both entities. Employment we havent decided yet whether it will
be a services contract where the employees will work for one of the entities
and provide services to the other.
That
is probably the most likely outcome but from an officer point of view, Greg
would be CEO of both companies. And ditto down the line with the key officer
component at a parent public company level. I think that is the current
thinking. It will look very much like Discovery Holdings looked like when we
first spun.
And
I think it will stay like that indefinitely until or unless there is a cluge of
assets together most likely it would happen on the LINTA side if as and when
everything sort of rolled into QVC. But I think that is speculative and a few
years off at least. Because there are too many other businesses right now that
have to be run that would be a distraction to the management team at QVC that
really needs to keep their focus on their retail business which is very well
run.
The
second question was, why keep the two trackers why not separate into three ?
Unidentified
Audience Member
(Inaudible-microphone
inaccessible)
John
Malone
Liberty Media Corporation - Chairman
Well,
there is a number of reasons. Part of it is tax driven. Secondarily, we
dont believe quite yet we really know where we are taking Starz. We are waiting
for Chris to fully come up the learning curve, to have a long-term plan for
Starz. Its better to wait on that one [before] we would think about splitting
three ways.
Greg
Maffei
Liberty Media Corporation - President, CEO
There
is assets that may be moved across its much more efficient to move assets
between the trackers has no tax implications versus moving and I think as to
Johns first point than moving them when they are truly separated companies,
for example, Starz media.
John
Malone
Liberty Media Corporation - Chairman
Once
weve done this, of course, we dont have any more issues with respect to debt.
because these companies basically will be effectively debt free. That is,
Liberty Capital and Liberty Starz will both have substantial cash and
essentially no debt. So lots of flexibility, but our therere times to do
things and times not to do things.
Tax
plays a role here, as well as stage development of the thinking about does
Starz fit with Liberty Capital? Does Live Nation fit with Starz? Does this pool
of capital between the two companies better deployed in combination as
opposed to separately? So, I think that is kind of the thinking that we
are engaging in right at the moment. Plus, I dont think Greg wants to be
the CEO of three companies.
5
Unidentified
Audience Member
(Inaudible-microphone
inaccessible) which one do you choose and why?
John
Malone
Liberty Media Corporation - Chairman
Well,
that is very hypothetical. I really dont if it hasnt been presented to me
so I think it really depends on where the meetings are going to be. Right at
the moment, because Greg will be the CEO and I will probably be the Chairman of
both, the meetings will all be and the directors will all be have a very
substantial overlap, it will be very convenient to have the meetings back to
back and therefore it is pretty painless to be Chairman or a director of both
as well as CEO.
Greg
Maffei
Liberty Media Corporation - President, CEO
I
have a high level of confidence that John will be Chairman of both, probably a
higher level of confidence that he had that I would be CEO of both.
Unidentified
Audience Member
(Inaudible-microphone
inaccessible)
John
Malone
Liberty Media Corporation - Chairman
I
didnt have a choice on DIRECTV. I got kicked out by the government, as a
practical matter. The cost for DIRECTV to solve their problem any other way was
multiples of the resolution we came to. And it was also clear that if I tried
to stay on both sides of the fence we would run into more and more overlaps
between LGI, DIRECTV and perhaps other entities that I was I had a greater
control position in. So I went with the ones that were more historic, and in
which I had a personally a larger control position.
But
I think it at the end it worked out very well for Liberty shareholders to get
the deal done even though we knew we were painting ourselves into a corner at
the time we did the deal. We thought DIRECTV had a way out in the end it didnt,
and we had to solve it the way we did.
And
as far as putting a hedge on as soon as you give up control of a company it
represents a substantial part of your net worth, it is probably wise to buy
some insurance, even though you dont want to sell it because you believe in
it. Having at one point been the largest shareholder of AT&T and not hedge
the position I learned a pretty big lesson there.
Unidentified
Audience Member
Just
to expand on [Matt]s question, a little bit about opportunities, specifically
at LCAPA. You guys obviously made a great investment in Sirius last year, but
the NAV discount there is still pretty massive. Where do you guys see
opportunities to either shrink the discount, or create shareholder value from
here?
John
Malone
Liberty Media Corporation - Chairman
You
are saying on Capital or ?
Unidentified
Audience Member
On
Liberty Capital specifically yes.
6
John
Malone
Liberty Media Corporation - Chairman
Yes.
No, we agree. We couldnt agree more, and we are buying stock back. We have a
stock buyback approved that we will probably file a 10b5 plan, so that when we
go blackout we probably will continue to buy. Right at the moment we think that
is our best marginal investment opportunity. I dont think anybody in the
Company argues that.
Greg
Maffei
Liberty Media Corporation - President, CEO
So, I
am not going to either argue with that. But we will look for other things.
You balance between shrinking your equity because you think its attractive
John
Malone
Liberty Media Corporation - Chairman
How
is your wife, compared to what? I mean, you sort of always have to go kick the
tires and see and we constantly evaluate all of our investments to say are
these buy/sell/hold kind of situations. And right at the moment simply
because Liberty Capital is so heavily illuminated, the assets are illuminated,
they are monetizable.
It
is much easier to sit here comfortably and say we are going in the right
direction if we shrink the equity there rather than a business we have great
faith in, but we wont know for ten years whether that faith was justified or
not. So, I think that is the reason why we are more comfortable with a
more aggressive shrink there than in the other entities.
Unidentified
Audience Member
In
respect to Liberty Capital, if you go out five to ten years, do you still see
it as this kind of quasi-opportunistic private equity fund or ?
John
Malone
Liberty Media Corporation - Chairman
Public-private
(inaudible) Id say.
Unidentified
Audience Member
Correct.
Or would you say in regards to Live Nation and Sirius you see something I guess
just maybe what the
John
Malone
Liberty Media Corporation - Chairman
You
put them together and you give them to your shareholders like we did with
DIRECTV. The real question is delivering ultimate value efficiently to your
investors. We are investors that is what we want to do. So if keeping them in
the fold makes sense, we will do that.
But
its spinning them when they reach a certain stage of maturity or if its a
certain tax advantage to it as weve demonstrated over the years we are
perfectly happy to shrink the Company and give the assets directly to the
investors. Very much in the way venture capital firms work actually, if you
think about it.
So
I think the answer is yes. Private we are going to operate like a private but
public investment fund. And what we have to watch out for, of course, are all
the rules. You cant be an investment holding company youve got those kind
of things. But within that parameter, Gregs number one job is to look for
another Sirius.
Greg
Maffei
Liberty Media Corporation - President, CEO
Thats
a problem because there is not likely to find another Sirius. But if I could I
think we will probably be opportunistic for a long time because we are going to
have these odds and ends which really are and a fair amount of cash which
make us this weird kind of or different
7
vehicle.
(Inaudible) we run one of the problems we have being a public private equity
firm we have an inordinate disadvantage versus these private private equity
firms and that they give the securities that they get to their limited partners
incur no corporate level tax.
We
have to think hard, structure hard, dance around to avoid that corporate level
tax because it is a 40% drag on our profits relative to them. So while we
enormous advantages, I think, in some ways about our willingness to be
more of an operative one space, we think TMT where we focused, hopefully some
good relationships, some good businesses to build on, we also run this kind of
negative aspect where our structure is not perfect compared to those guys.
John
Malone
Liberty Media Corporation - Chairman
But
in our willingness to use leverage. We look a lot like private equity.
Unidentified
Speaker
(Inaudible-microphone
inaccessible)
John
Malone. We have permanent capital.
Greg
Maffei
Liberty Media Corporation - President, CEO
But
increasingly, those guys are moving towards permanent capital too right? I mean
Apollo, KKR are effectively public entities. So, that advantage has dissipated
to a degree.
Greg
Maffei
Liberty Media Corporation - President, CEO
Well, I
think the Live Nation business is a great long-term opportunity. Michael Rapino, Irving
Azzof are two of the smartest guys in the music business with a great model
around the ticket, around the opportunity to monetize as the music business
has changed a lot of additional ways that people got paid albums. There is no
such thing as an album anymore. Those have gone away. The tour, the events have
been a huge part of the way people get paid and they are at the center of that
and with lots of opportunity to add things on.
The
merger created interesting opportunity but it also had some restrictions. It
had incurred some costs as they had not only merger things to clean up, but
they had restrictions on what they were allowed to do and they were forced to
sell certain things off that are going to impact early results.
So
I think if you look at it, it is not a stock that is well covered by analysts
and the few analysts that were out there had some very high estimates for 2010.
Probably too high, I think the management team would say that as well. So,
we look and like the long term opportunity.
We
obviously were interested in buying more, but us being the floor in the stock
is not particularly interesting where we didnt get to buy much stock. And we
thought when it got up around $16.00 it got ahead of itself not there isnt a
great opportunity, but the current result didnt merit that.
John
Malone
Liberty Media Corporation - Chairman
When
we tendered at $12.00 we thought that was a full and fair value at that time as
we perceived the business. When the stock ran way past that, we said maybe
other people know something we dont or have more tolerance for risk. Stock has
now come back down into sort of the range that we thought it was viable.
We
actually originally moved that asset reassigned that asset from LINTA over to
LCAPA so that we could be opportunistic if we thought putting capital in would
make sense. I dont think we have any particular decision at this point whether
to increase our stake or not, but it is certainly something we will keep our
eye on.
8
And
as we get comfortable with the integration of the management teams and with the
clean up of the balance sheet and so on, we may see the opportunity to increase
our stake there. But I dont think at this point we are that is not number
one on our radar screen. For Liberty Capital, buying its own stock back is a
much more attractive return today at this price than chasing what we regard as
a pretty fully valued investment.
Greg
Maffei
Liberty Media Corporation - President, CEO
And
just to as I mentioned, we saw businesses out there that are feeling the
impact of the consumer being tapped. Live Nation has that aspect where concerts
it is a tougher business today than it probably was in 2008. Not that it wont
be a great business for the long-term, but it is one where the consumer has the
opportunity he or she not to purchase or differ purchase or take a cheaper
ticket or whatever. And they have also had some events like U2 Bonos back
going out that have hurt the US tour, so they are not going to see that as
2010 revenue. There are a bunch of short term factors that I think make well
sit and watch.
All
right, last question.
Unidentified
Audience Member
(Inaudible-microphone
inaccessible)
Greg
Maffei
Liberty Media Corporation - President, CEO
Not
that I know of. I believe the only restriction we have is we cant go over 35%
without the approval
John
Malone
Liberty Media Corporation - Chairman
Well,
periodic blackouts because we do have directors on the Board.
Greg
Maffei
Liberty Media Corporation - President, CEO
Im
sorry, John is I meant our relationship with the company is the only one we
have. John is talking all purchases, where you have an
John
Malone
Liberty Media Corporation - Chairman
We
have an agreement as part of the merger that the company would not interfere
with us in any way up to 35% ownership. If we want to go north of that, there
is no understanding. They may or may not choose to block us if we wanted to go
into control, for instance. That we have a clear right to go to 35% with the
support of the board.
Additional
Information
Nothing
in the transcript shall constitute a solicitation to buy or an offer to sell
shares of the entity to be split-off from Liberty or any of the Liberty
tracking stocks described in the transcript.
The offer and sale of such shares in the proposed split-off will only be
made pursuant to an effective registration statement. Liberty stockholders and
other investors are urged to read the registration statement to be filed with
the SEC, including the proxy statement/prospectus to be contained therein,
because it will contain important information about the transaction. A copy of the registration statement and the
proxy statement/prospectus, once filed, will be available free of charge at the
SECs website (http://www.sec.gov). Copies of the proxy statement/prospectus
and the filings with the SEC that will be incorporated by reference in the
proxy statement/prospectus can also be obtained, without charge, by directing a
request to Liberty Media Corporation, 12300 Liberty Boulevard, Englewood,
Colorado 80112, Attention: Investor Relations, Telephone: (720) 875-5408.
9
Participants
in a Solicitation
The
directors and executive officers of Liberty and other persons may be deemed to
be participants in the solicitation of proxies in respect of proposals to
approve the split-off. Information regarding Libertys (and, if formed, the new
companys) directors and executive officers and other participants in the proxy
solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be available in the proxy materials to be
filed with the SEC.
10
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