DirecTV, the U.S. satellite- television provider, said Chairman John Malone will cut his voting stake in the company and leave the board, responding to regulatory concerns over his media ownership.
Class B shares held by Malone, his wife and two family trusts will be exchanged for Class A shares, cutting his votes to about 3 percent from more than 24 percent, El Segundo, California-based DirecTV said yesterday in a statement.
Reducing his votes will help Malone, who is also chairman of Liberty Media LLC, respond to concerns that he has too much power in Puerto Rico, where both Liberty and DirecTV operate TV businesses. The U.S. Federal Communications Commission had called on Malone to sever the Puerto Rico connections after Liberty bought an interest in DirecTV from News Corp. in 2008.
“This is more of a ‘dot the i’s and cross the t’s’ sort of transaction,” said Todd Mitchell, an analyst with Kaufman Bros. LP in New York. “Malone owned controlling votes in both DirecTV and Liberty, and that created an antitrust issue in Puerto Rico. I don’t think it’s that material from an investor standpoint.”
The agreement may make DirecTV more attractive to a potential buyer such as AT&T Inc. by eliminating the need to pay more to a shareholder with special voting rights, said Chris Marangi, an analyst at Gabelli & Co. in Rye, New York. The transaction also gives Englewood, Colorado-based Liberty the freedom to explore new acquisitions in the region, he said. Gabelli is an affiliate of Gamco Investors Inc., which owned 12.9 million shares of DirecTV as of December.
“The bullish view is that perhaps Dr. Malone views DirecTV as a merger candidate and resolving his super-voting interest could make a deal easier,” Marangi said. “This also frees Liberty Global’s hand to go elsewhere in Latin America.”
In an interview last month, Malone predicted further consolidation in the U.S. media industry as fee disputes between pay-TV providers and programmers escalate. Smaller pay-TV distributors are going to have to merge in order to increase their negotiating clout with large program producers, he said.
The conversion of Malone’s shares and his resignation from the board will allow DirecTV to take its Puerto Rican service out of the trust arrangement it’s currently in and reintegrate the unit with the rest of the company’s Latin American business, DirecTV spokesman Darris Gringeri said in an e-mail.
The move makes the possible spinoff of DirecTV’s Latin American operations less likely, Marangi said.
Greg Maffei, chief executive officer of Liberty Media, and Paul Gould, a director at Liberty Media unit Liberty Global, also will resign from DirecTV’s board, the company said.
DirecTV rose 5 cents to $34.74 yesterday in Nasdaq Stock Market trading. The shares had gained 4.2 percent this year before today.
Source: Business Week