Split Liberty to focus on debt markets

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John Malone is splitting up his Liberty Media group with a view to being ready to invest in the corporate debt markets, where he expects values to collapse at some point under the weight of the highly-leveraged acquisitions being made by private equity investors.

Mr Malone said on Monday his plan for separating Liberty Media’s interactive assets from its financial investments was aimed at giving Greg Maffei, the new chief executive, more scope to pounce on future opportunities, such as potential ones in the debt markets.

Mr Maffei, who left Oracle abruptly this month after only four months as the software developer’s chief financial officer, was appointed by Mr Malone last week. The two men have known each other since the early 1990s, when Mr Maffei, as Microsoft’s chief financial officer, struck cable sector deals with Liberty Media.

“Greg’s experience will be helpful in figuring out how to grow the interactive assets,” said Mr Malone in a joint telephone interview with Mr Maffei. “But the real home run is in the capital company,” he said.

“We don’t know what (the opportunities) will be. However, when you leverage businesses as highly as the private equity guys are doing, combined with (higher interest rates), I have got to believe pressure is going to be felt by operating businesses as they struggle to service the rising cost of debt,” Mr Malone said.

Mr Malone, one of the founders of the US cable business, will remain chairman of Liberty Media. Last year, Mr Malone hit the headlines after Liberty Media increased its voting stake in Rupert Murdoch’s News Corp to 19 per cent, prompting Mr Murdoch to adopt poison pill measures to prevent a further build-up.

Mr Malone took over as interim chief executive of Liberty Media this summer and decided to create tracker shares for QVC, its home shopping business, and other “interactive” assets such as stakes in IAC and Expedia. The shares are a likely precursor to a full spin-off.

Mr Maffei was Mr Malone’s top choice as chief executive due to his experience in media businesses and in finance, and approached him to ask if he knew anyone suitable for the job. “I had a modest hope (when I contacted him) that things had not worked out and that Greg was looking for somewhere more entrepreneurial than Oracle,” Mr Malone said.

In the last years, Mr Malone has spun off a number of Liberty Media’s divisions in an effort to simplify the company and remove the discount at which it trades in the stock market.

Liberty Global, now the biggest cable operator outside the US, was spun off last year. The group was built up with investments in the distressed debt of cable companies bought in the early 1990s after frenzied over-investment in the sector.

Mr Malone said on Monday he hoped to build on the experience of last year’s spin-off of Liberty Global, now the biggest cable operator outside the US, and, with hindsight, wished he had made many more similar investments after the bursting of the internet and technology bubble.

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