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Liberty: Studio’s ‘Over’

8/02/2010 12:01 AM Eastern

Starz LLC’s decision to shut down its Overture
Films movie studio last week could be a step toward further
simplifying Liberty Capital and Liberty Starz, two of Liberty
Media Corp.’s tracking stocks.

Overture was housed within Starz Media, itself contained
within Liberty Capital. Its subtraction removes one of Starz
Media’s loss leaders and sets the stage for an asset swap with
Liberty Starz. Pivotal Research principal and media & communications
analyst Jeff Wlodarczak estimates Liberty Starz
— parent of premium cable channels in Starz Entertainment
— would pay $25 million to $50 million for Starz Media’s remaining
assets. They are animation distributor Film Roman
and home-video house Anchor Bay Entertainment.

Collins Stewart media analyst Tom Eagan said merging Starz
Media with Liberty Starz could help reduce the latter’s trading
discount (and increase its trading multiple) by making it a hard
asset stock. Tracking stocks generally carry 20% to 25% discounts
to net asset value, Eagan wrote in a note. He said Liberty Starz currently
trades at about 4.5 times 2011 estimated cash flow.

Starz LLC said it closed down Overture last Monday and reached
a separate deal with independent studio Relativity Media to distribute
the Philip Seymour Hoffman-directed Jack Goes Boating,
the Robert DeNiro vehicle Stone and vampire flick Let Me In.

September