Liberty Interactive/GCI Seen Facing Smooth Regulatory Sailing
Liberty Interactive's proposed $1.12 billion buy of Alaska-based General Communication Inc. likely faces few regulatory approval challenges, because of assets of the parties and the current regulatory climate, experts told us. Cable consultant Steve Effros said there likely won't be any major issue for the deal under this administration.
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The deal doesn't seem to pose any risk of diminished competition that could lead to it getting blocked, said cable and broadband lawyer Chris Redding of BakerHostetler. Liberty Interactive Chairman John Malone has a stake in Charter, but he isn't in control of the company, Redding said. Liberty has programming interests through its QVC Group and Liberty Ventures Group subsidiaries -- 100 percent of QVC, 38 percent of HSN and less than 1 percent of Time Warner, according to its website -- but QVC doesn't represent must-carry programming that could raise anti-competitive concerns, Redding said. And the DOJ under President Donald Trump doesn't have the same "big is bad" approach as under the Obama administration and the FCC is appearing particularly uninterested in nontransaction-specific conditions, Redding said, pointing to it reversing itself this week on the network overbuild condition it required of Charter Communications when buying Time Warner Cable and Bright House Networks (see 1704030039 and 1704040021).
Liberty and GCI have no network overlap in Alaska, so the deal wouldn't change the competitive landscape there, said a lawyer with cable ISP deal experience. The lawyer said the FCC even under Democrats has been amenable to combinations that include content holdings, most notably Comcast's buy of NBCUniversal. The lawyer said there were concerns raised in Charter/TWC about Malone's influence (see 1511170044), but the FCC ultimately concluded he lacked the incentive to withhold programming from competing online video distributors because of the lost potential revenue, so it likely would be similarly untroubled in Liberty/GCI.
Liberty/GCI could down the road lead to a deal with Liberty Broadband "and inevitably" Charter, Pivotal Research analyst Jeffrey Wlodarczak wrote investors.
The agreement would see Liberty sell its Liberty Ventures Group to GCI in exchange for controlling interest in that GCI Liberty combined company, with it then spinning off GCI Liberty, the two companies announced. They said the deal is expected to close by Q1, subject to regulatory approval of the GCI acquisition and split off by the FCC and Regulatory Commission of Alaska and to shareholder approval by GCI and Liberty Ventures stakeholders. GCI Liberty's assets would also include Liberty Ventures' stakes in Charter and Liberty Broadband, Liberty said. Meanwhile, Liberty Interactive after the transaction would be renamed QVC Group, with its assets including QVC and HSN, it said. The two companies said de minimis amounts of Time Inc. and Time Warner stock would be reattributed from Liberty Ventures to QVC Group as part of the deal
GCI shareholders would receive $32.50 per share in the form of GCI Liberty common and voting preferred stock, while legacy Liberty Ventures shareholders would have 75.8 percent of the common equity in GCI Liberty. Liberty said it saw opportunities to improve GCI margins through cost and efficiency steps. GCI had 127,600 data subscribers, 107,700 video subscribers and 48,600 voice subscribers as of the end of 2016, it said.