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