Heritage

"Bob and I had known Heritage chairman Jim Hoak for years, so we flew out to Des Moines, Iowa, to check his temperature. Bob and I had doubled up in a single room at the local Holiday Inn, and the night before we met Jim, we made a beeline for the hotel bar after dinner, still chewing over the issues of control. “What if we did this with two classes of stock?” I asked Bob. “TCI can split its stock, then issue a class B share for every share that exists.” Bob looked at me, his empty face begging for an explanation for this unprecedented maneuver."

"“And the only difference after this two-for-one stock split,” I told him, “is that the class B shares would have ten votes per share, giving holders of that stock ten-to-one voting power over regular class A shares.” If we could redeem Hatch’s B shares and buy enough class B shares on the open market, we could safeguard control. So TCI split the stock, and Bob swapped all his class A shares for Hatch’s super-voting B shares, and then exchanged as many class A shares as we could on the open market. Hatch then used his shares in TCI to acquire the 25 percent stake in KSN from the Heritage company in Des Moines. To facilitate the trade, TCI bought an interest in Heritage, whose stock shot up when it sold its KSN position. Eventually we would acquire all of Heritage."

"The idea for two classes of stock was a seminal solution for TCI and one of my prouder moments. Magness was able to double his 20 percent voting control of TCI at the time to around 40 percent, Hatch got out of TCI. And TCI ended up with a profitable stake in Heritage—all tax-free because the deals were stock swaps."