Liberty splits off DirecTV into new larger unit

By Yinka Adegoke

NEW YORK (Reuters) - Liberty Media Corp LINTA.O said on Monday it plans to combine the No. 1 U.S. satellite TV service DirecTV Group Inc <DTV.O with its other media assets to form a new company.

Liberty, controlled by cable pioneer John Malone, plans to combine DirecTV with assets held by Liberty Entertainment LMDIA.O including Game Show Network, FUN Technologies and three regional sports networks. Liberty owns a 54 percent economic stake in DirecTV.

The new company will retain the DirecTV name and still be led by current Chief Executive Chase Carey, with Malone remaining as chairman of an unchanged board. But Malone's voting stake will fall to 24 percent, from the 48 percent that Liberty Media currently has.

Holders of Liberty Entertainment shares will receive 1.1111 shares of DirecTV Class A for each share. That translates to DirecTV paying a premium of around $350 million.

"At current prices, it's a better deal for Liberty Media than it is for DirecTV," said Thomas Eagan, analyst at Collins Stewart.

Eagan said investors will view the fact that DirecTV bought Liberty Entertainment rather than the other way round as a positive in Liberty Media's favor. "John (Malone) not wanting to buy DirecTV got DirecTV to buy him," said Eagan.

Shares in Liberty Media rose 3.62 percent to $25.21 in early afternoon trading, while DirecTV shares were down 2.6 percent to $23.93.

Carey said the move meant DirecTV will now be controlled by its own shareholders for the first time and that Malone's interests will be more closely aligned with those of other DirecTV shareholders.