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Maffei: No Liberty Roll-Up

12/12/2008 7:00 PM Eastern

Anyone who was hoping that Liberty Media would bite the bullet and roll up its three tracking stocks — Liberty Interactive, Liberty Capital and Liberty Entertainment — into one entity received a setback last week, after Liberty Media CEO Greg Maffei said that a roll-up would probably upset existing shareholders.

Maffei, speaking at the UBS Media and Communications conference last week in New York, said that the planned “hard spin” of Liberty Entertainment is still a priority, although market conditions have delayed a transaction. He said that rolling up all three trackers into Liberty Media is a potential scenario, but wouldn't be fair to current holders of the trackers.

“People invested in [Liberty] Entertainment and [Liberty] Capital for a particular reason,” Maffei said. “We're trying to honor that reason.”

In a research note, Collins Stewart media analyst Tom Eagan called Maffei's comments a “somewhat rare admission that recombining the stocks would not honor [Liberty Entertainment] shareholders' original intention.”

Eagan wrote that Liberty has two reasons for delaying the Liberty Entertainment spin: its desire to enhance the liquidity potential at Liberty Interactive — which includes QVC and several online assets — by keeping the Entertainment assets as part of the same legal entity and the concern that even after a spin, Liberty Entertainment would trade at a considerable discount and therefore not be in striking distance to merge with DirecTV. One of Liberty Entertainment's main assets is Liberty's 53% interest in DirecTV.

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