LMCA - Liberty Media

[Guest wellmont]

[shadow=red,left][/shadow]

I don't know if you guys looked at this, but the Comcast Charter Spinco deal is SUPER SUPER accretive.

 

Take a look at this. I used a mandatory 30% return discount rate.

 

thanks for that nice spreadsheet. by I wonder if you could clarify it a bit. Are you saying that $189 is your estimated intrinsic value of $chtr when you factor in the spin off?

[LC]

15% ebitda growth rate? Curious on your justification for that.

[Wilson-TPC]

I think Charter hasn't realized it's full operational efficiency yet. I think there are still lots of areas it can improve on. The 15% is a broad number, but that factors in future roll up acquisitions, improvements in scale efficiencies, and continued progression to digital.

 

The $40 improvement is the spinco transaction with Comcast. It's instantly accretive to Charter.

[Guest JoelS]

My notes from the earnings call, please excuse inaccuracies:

 

liberty broadband - Q4 timing. debt 300- 350mn. rights offering to raise about 700m where it trades today.. similar to liberty ventures rights offering.

 

made good progress in businesses.

 

sirius - good results. bought back 1.6bn in 2014, and increased repurchase authorization by 2bn, total 6bn. liberty's ownership increased to 56%, given did not sell shares.

expect good year for live nation.

charter - 1/3rd now subscribes to triple play. all digital on plan. by year end, all customers will have access to charter spectrum.

 

Questions:

 

1. When would they participate in buybacks by sirius - when sirius share price is $10. lol.

2. Sirius to offer streaming, like spotify? Moving in that direction with some ideas. nothing concrete.

3. comfort level in giving sirius product further price hikes and M and A? - after long period of not taking price increases, took a couple over the last few years. and churn is down. clear that they have a committed group of customers who find value in it. won't comment further on price increases, but group is very committed to product. Sirius positioned well in the telematic space.

4. Siri - buy it all? - Liberty is optimistic. control it, like it, right circumstances arose on valuations, might make offer again. time and place right now. Issuance of C shares might make that simpler. but see what happens.

5. liberty broadband - could broadband increase stake in charter? possibly, cable only shareholders, who understand plan.

6. Cable M&A - what is appetite, 5x debt ebitda at charter and broadband. Sirius could be private effectively in 4 years with buybacks? Liberty is interested in what can happen? One's we have done, but others out there.. if you are not aligned with big players, you are at somewhat of a disadvantage. Charter is natural acquirer.. given comcast market size.. through charter highly likely, but perhaps outside of charter. turn to Siri, yes, sooner or later own whole thing, but depends on assumptions.. will not chase companies.

7. desire to get cash out of Siri - feel liquidity constrained at LMCA? sitting at 800mn today, depends what we want to do. could get 1bn out of Siri, and still hold more than 50% of co, esp if they increase leverage as they say they will do.. Could raise incremental capital if they wanted to. Ways to get cash, despite not a lot on balance sheet..

8. anything preventing once broadband, to margin broadband - NO. other than initial 300-350mn.

9. Update on your plans Greg? Had good discussions - Malone: "work in progress".. hmm..

10 Specifics on buybacks at Liberty broadband - could do some at any time.

11. Trueposition - what should we be focussed on? They have tech which enables GSM devices to be located in building - more accurate way to find a device than GPS..

12. LBRDA help LBTYA? not likely - global focussed overseas. except coop on cable tech developments. but financial - highly unlikely.

13. value of acquiring smaller cable systems at 1m subs or less. Very accretive - especially if they're within management area.

14. Broadband.. stated to be used as a currency? but also say charter will remain the main vehicle? What optionality does Broadband provide?? Could invest alongside Charter as well as through Charter.

 

[loganc]

I haven't had a chance to listen to the call yet, but this excerpt was interesting:

 

http://www.hollywoodreporter.com/news/malone-talks-fox-time-warner-723092

 

Discussing Charter's deal, Malone reminded investors that Charter originally had gone after all of TWC. He argued that the deal Charter got in the end was "superior to the one they started with," saying "shareholders are better off" than if Charter had bought all of TWC.

 

If the Comcast deal gets blocked by regulators, Charter could re-start full deal talks with TWC, "but that's not something we expect," Malone said.

 

This is from the great, albeit brief, Q&A with Malone during the Stockholder's Meeting.  I think it is also worth noting that Malone mentioned that (paraphrasing) it isn't bad that liberty has historically traded at a discount to NAV given the fact they are a serial acquirer of stock.  I think this validates some of the comments that others in this thread have made about using complexity to generate discounts in the market. 

[Saidal]

Random question -  does anyone know if there is a performance chart posted somewhere with the various Liberty spin-offs and post-spin performance? I probably can pull this off CapIQ if needed, yet if there is one made already, I'd rather lever that.

[Wilson-TPC]

I don't have an access to a chart of that sort...

 

But the last time he did something similar like that was with Liberty Venture... and that thing performed so well...

[orion]

LMCK now trades at a premium to LMCA.  :o

[Liberty]

http://glennchan.wordpress.com/2014/08/07/lmcalmck-share-class-arbitrage/

 

Thanks for the idea Glenn, I swapped my LMCK shares for LMCA this morning at a slight gain. Event hough the voting power of the A shares is kind of theoretical in this company because of Malone's control, I still don't see how having voting power can't be worth at least a little something.

[ItsAValueTrap]

No problem.

[Liberty]

How LMCA is likely to swallow SIRI over time:

 

http://seekingalpha.com/article/2420095-sirius-xm-liberty-media-and-pie?uprof=45

[jay21]

My notes from the earnings call, please excuse inaccuracies:

 

liberty broadband - Q4 timing. debt 300- 350mn. rights offering to raise about 700m where it trades today.. similar to liberty ventures rights offering.

 

made good progress in businesses.

 

sirius - good results. bought back 1.6bn in 2014, and increased repurchase authorization by 2bn, total 6bn. liberty's ownership increased to 56%, given did not sell shares.

expect good year for live nation.

charter - 1/3rd now subscribes to triple play. all digital on plan. by year end, all customers will have access to charter spectrum.

 

Questions:

 

1. When would they participate in buybacks by sirius - when sirius share price is $10. lol.

2. Sirius to offer streaming, like spotify? Moving in that direction with some ideas. nothing concrete.

3. comfort level in giving sirius product further price hikes and M and A? - after long period of not taking price increases, took a couple over the last few years. and churn is down. clear that they have a committed group of customers who find value in it. won't comment further on price increases, but group is very committed to product. Sirius positioned well in the telematic space.

4. Siri - buy it all? - Liberty is optimistic. control it, like it, right circumstances arose on valuations, might make offer again. time and place right now. Issuance of C shares might make that simpler. but see what happens.

5. liberty broadband - could broadband increase stake in charter? possibly, cable only shareholders, who understand plan.

6. Cable M&A - what is appetite, 5x debt ebitda at charter and broadband. Sirius could be private effectively in 4 years with buybacks? Liberty is interested in what can happen? One's we have done, but others out there.. if you are not aligned with big players, you are at somewhat of a disadvantage. Charter is natural acquirer.. given comcast market size.. through charter highly likely, but perhaps outside of charter. turn to Siri, yes, sooner or later own whole thing, but depends on assumptions.. will not chase companies.

7. desire to get cash out of Siri - feel liquidity constrained at LMCA? sitting at 800mn today, depends what we want to do. could get 1bn out of Siri, and still hold more than 50% of co, esp if they increase leverage as they say they will do.. Could raise incremental capital if they wanted to. Ways to get cash, despite not a lot on balance sheet..

8. anything preventing once broadband, to margin broadband - NO. other than initial 300-350mn.

9. Update on your plans Greg? Had good discussions - Malone: "work in progress".. hmm..

10 Specifics on buybacks at Liberty broadband - could do some at any time.

11. Trueposition - what should we be focussed on? They have tech which enables GSM devices to be located in building - more accurate way to find a device than GPS..

12. LBRDA help LBTYA? not likely - global focussed overseas. except coop on cable tech developments. but financial - highly unlikely.

13. value of acquiring smaller cable systems at 1m subs or less. Very accretive - especially if they're within management area.

14. Broadband.. stated to be used as a currency? but also say charter will remain the main vehicle? What optionality does Broadband provide?? Could invest alongside Charter as well as through Charter.

 

Thanks.

 

Has anyone seen a transcript link?

[sriraja]

No transcript link but here is the full audio -

 

http://seekingalpha.com/article/2381265-liberty-media-lmca-q2-2014-results-earnings-call-webcast

[Picasso]

If you put the discount on the Charter stake, someone is effectively buying Charter for about 72 per share.

 

I had to go back a few pages to quote this, but I am curious on your thoughts for why Berkshire Hathaway bought $365 million of CHTR and sold $50 million of LMCA (roughly).  It would seem to me like one would just load up on LMCA if CHTR is undervalued.  Perhaps there is something Weschler does not like about the Liberty Broadband structure?

[dwy000]

Maybe they don't want the Sirius, Live Nation, Atlanta Braves, etc assets.  It's possible that the Liberty Broadband spinoff will trade at full value and the discount will apply to Sirius and the remaining assets.

[Picasso]

Maybe they don't want the Sirius, Live Nation, Atlanta Braves, etc assets.  It's possible that the Liberty Broadband spinoff will trade at full value and the discount will apply to Sirius and the remaining assets.

 

The more I think about it, that makes sense.  However I can't help but wonder if you get into a situation like current Sirius shareholders where Liberty is finding ways to maximize the value of their stake in SIRI versus SIRI maximizing returns for their own shareholders.  You end up having a majority shareholder who would rather have the share price of CHTR go down.  From my point of view I would opt for Liberty Broadband and take my chances with the rest of the pieces.

[Liberty]

Maybe they don't want the Sirius, Live Nation, Atlanta Braves, etc assets.  It's possible that the Liberty Broadband spinoff will trade at full value and the discount will apply to Sirius and the remaining assets.

 

If they didn't want those, they probably wouldn't have 450m of LMCA, more than CHTR.

[Picasso]

Maybe they don't want the Sirius, Live Nation, Atlanta Braves, etc assets.  It's possible that the Liberty Broadband spinoff will trade at full value and the discount will apply to Sirius and the remaining assets.

 

If they didn't want those, they probably wouldn't have 450m of LMCA, more than CHTR.

 

I only show 4 million shares of LMCA from the last 13F unless I am missing something.

 

Either way I am curious of the future performance of CHTR versus LMCA versus LBRDA especially from a tax perspective.  LBRDA should be able to leverage CHTR assets and take advantage of any major discounts in the market value of either CHTR or LBRDA.  The only fishy thing is, something seems too easy....

[Liberty]

Maybe they don't want the Sirius, Live Nation, Atlanta Braves, etc assets.  It's possible that the Liberty Broadband spinoff will trade at full value and the discount will apply to Sirius and the remaining assets.

 

If they didn't want those, they probably wouldn't have 450m of LMCA, more than CHTR.

 

I only show 4 million shares of LMCA from the last 13F unless I am missing something.

 

Sorry for the confusion, I meant 450m dollars, not shares. More than the value of their stake in CHTR.

 

My guess is they like both and just wanted to tilt the ratio of CHTR to other assets in CHTR's direction a bit more.

[Picasso]

Maybe they don't want the Sirius, Live Nation, Atlanta Braves, etc assets.  It's possible that the Liberty Broadband spinoff will trade at full value and the discount will apply to Sirius and the remaining assets.

 

If they didn't want those, they probably wouldn't have 450m of LMCA, more than CHTR.

 

I only show 4 million shares of LMCA from the last 13F unless I am missing something.

 

Sorry for the confusion, I meant 450m dollars, not shares. More than the value of their stake in CHTR.

 

My guess is they like both and just wanted to tilt the ratio of CHTR to other assets in CHTR's direction a bit more.

 

 

Ah right, in the next Berkshire filing we'll see 8 million LMCK shares as well.

[Wilson-TPC]

If you put the discount on the Charter stake, someone is effectively buying Charter for about 72 per share.

 

I had to go back a few pages to quote this, but I am curious on your thoughts for why Berkshire Hathaway bought $365 million of CHTR and sold $50 million of LMCA (roughly).  It would seem to me like one would just load up on LMCA if CHTR is undervalued.  Perhaps there is something Weschler does not like about the Liberty Broadband structure?

 

I don't let Buffett nor his lieutenants dictate the way I invest. I think Starz is a fine investment, they don't think so. I think LMCA is a fine investment with the ability to buy CHTR OR SIRI at an extreme discount. If they wanted exposure to CHTR more then let them, but remember. Owners of LMCA really only has a 30% stake in CHTR. So if you wanted more exposure, a direct ownership is better. 

[merkhet]

So Liberty Broadband gets Liberty Media's

[*]interest in Charter Communications,

[*]subsidiary TruePosition,

[*]minority equity investment in Time Warner Cable,

[*]liabilities associate with the Time Warner call option,

[*]certain deferred tax and deferred revenue liabilities, and

[*]about a billion in cash.

Is anyone else viewing the Time Warner call option as something that will eventually be turned into cash? So that's about $280 million extra cash once you take into consideration the call option liability?

[merkhet]

As a side note, I decided to take a look at how much Todd & Ted own in terms of Liberty & Liberty-related entities for Berkshire:

 

Liberty Media - $546 million

Liberty Global A - $365 million

Charter Communications - $436 million

Liberty GLobal C - $310 million

 

It totals up to $1.66 billion for two guys that each run about $7 billion. I would love to know (but will probably never find out) whether one guy has 20% of his "fund" in Malone or if it's split evenly amongst both of them.

[dwy000]

The Time Warner cable call option is a liability.  I'm pretty sure it's tied to the equity investment in TWC (basically sold it off as convertible debt).  I could be wrong on that but I think the 2 positions effectively net out from an equity perspective.

[ItsAValueTrap]

As a side note, I decided to take a look at how much Todd & Ted own in terms of Liberty & Liberty-related entities for Berkshire:

 

Liberty Media - $546 million

Liberty Global A - $365 million

Charter Communications - $436 million

Liberty GLobal C - $310 million

 

It totals up to $1.66 billion for two guys that each run about $7 billion. I would love to know (but will probably never find out) whether one guy has 20% of his "fund" in Malone or if it's split evenly amongst both of them.

 

Berkshire has a SC 13-something filing for LMCA.  Weschler's name appears on it while Todd's name does not.  Weschler also personally owns shares of LMCA I believe.