Liberty Interactive Agrees to Acquire General Communication in Complicated Deal

By Timothy Green Markets Fool.com

What happened

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Liberty Interactive (NASDAQ: QVCA) announced on Tuesday that it had agreed to acquire cable company General Communication (NASDAQ: GNCMA) as part of a complicated deal that will eliminate its tracking stock structure. At 1:15 p.m. EDT, shares of Liberty Interactive were up 1.5%, shares of General Communication were up 64%, and shares of Liberty Ventures (NASDAQ: LVNTA), comprised of various subsidiaries of Liberty Interactive, were up 11%.

So what

Liberty Interactive plans to acquire General Communication through a reorganization where certain Liberty Ventures assets and liabilities are contributed to General Communication in exchange for a controlling interest. Liberty Interactive will then separate this controlling interest in a tax-free transaction, creating GCI Liberty Inc. Shares of this new company will then be distributed to Liberty Ventures shareholders in exchange for all outstanding shares.

Image source: Liberty Interactive.

General Communication shareholders will receive $32.50 for each share, comprised of $27.50 worth of GCI Liberty Class A common stock and $5 worth of newly issued Series A preferred shares, which will accrue dividends at a 5% annual rate and be redeemable on the 21stanniversary of the closing of the deal.

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Now what

Liberty Interactive President and CEO Greg Maffei laid out the rationale for the deal by saying:

We are pleased to announce this transaction with GCI. GCI is the largest communications provider inAlaska, generates solid cash flow with upside potential and is a strong fit with the largest businesses inLiberty Ventures. This transaction will ultimately create a stand-aloneLiberty Ventures, reducing the tracking stock discount and enabling an asset-backedQVC Group.

Liberty Interactive hopes that the discount associated with its tracking stock structure will be eliminated by this transaction. General Communication shareholders are getting a substantial premium, albeit with payment in a complicated form. An expected closing date of the deal was not given.

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Timothy Green has no position in any stocks mentioned. The Motley Fool recommends General Communication. The Motley Fool has a disclosure policy.