Liberty Media

""Rupert Murdoch holds 15% of the shares of News Corp., but 39% of the voting rights; even better, John Malone, with only 3% of the shares of Liberty Media, can rely on 28% of the voting rights; and it goes up to 53% for Facebook, of which Mark Zuckerberg [the founder] has only 15% of the shares.""

"Buffett, after a long period of relative inactivity stretching back to the immediate aftermath of 9/11, has had one of the most active periods of his long career. Since the fourth quarter of 2008, he has deployed over $80 billion (over $15 billion of it in the first twenty-five days after the Lehman collapse) in a wide variety of investing activities: • Purchased $8 billion of convertible preferred stock from Goldman Sachs and General Electric • Made a number of common stock purchases (including Constellation Energy): $9 billion • Provided mezzanine financing to Mars/Wrigley ($6.5 billion) and Dow Chemical ($3 billion) • Bought various distressed debt securities in the open market: $8.9 billion • In Berkshire’s largest deal ever by dollar value, bought the 77.5 percent of Burlington Northern that he didn’t already own for $26.5 billion • Acquired Lubrizol, a leading, publicly traded lubricant company for $8.7 billion • Announced a sizable ($10.9 billion) new investment in IBM stock Over the same period, John Malone has been quietly conducting an extended experiment in aggressive capital allocation across the disparate entities that were spun out of TCI’s original programming arm, Liberty Media. In the depths of the financial crisis, Malone: • Implemented a “leveraged equity growth” strategy at satellite programming giant DIRECTV—increasing debt and aggressively repurchasing stock (over 40 percent of shares outstanding in the last twenty-four months). • Initiated a series of moves across the former Liberty entities, including the spin-off of cable programmer Starz/Encore and a debt-for-equity swap between Liberty Capital (owner of Malone’s polyglot collection of public and private assets) and Liberty Interactive (home of the QVC shopping network and other online entities)."

"percent of its equity to TCI for our digital Headend in the Sky (HITS) distribution network, making Liberty Media, through TCI, GI’s largest shareholder. The stock walked steadily from $12 to $50, and Liberty later raised its stake to 18 percent by buying 10 million shares from Forstmann Little & Co."

"Only about a third of the TCI investors swapped their shares for Liberty stock. After my talk with Ted, I bought as much of Liberty Media as I could, swapping in a third of my TCI shares for what amounted to nearly 9 percent of Liberty shares in return. After borrowing $25.6 million to exercise the options I was given, I would come to control 20 percent of Liberty’s class B stock, which was allowed ten votes per share. And using rights Bob transferred to me, I would control close to 40 percent of the shareholder votes at Liberty."

"Over the next two years, Liberty Media would release more shares to increase liquidity and make it more affordable, splitting Liberty stock 20-for-1, then 4-for-1, and then 2-for-1. Our theory of making money was similar to Berkshire Hathaway—a portfolio of companies run by a lively mix of driven and dedicated entrepreneurs."

"My financial gamble on him paid off handsomely. He was also the first person to introduce me to the idea of ownership in something versus just drawing a paycheck. This advice helped inspire me to form Liberty Media, the holding company for many of the channel ownership stakes TCI was accumulating. Since I now had skin in the game, my wealth grew alongside the rising value of the company, benefitting thousands of our shareholders, as well; this is the way it is supposed to work, and for us, it has worked wonderfully."

"We could not simply spin Liberty off into its own company—it did not meet the spin-off rules at the time, which required majority ownership of the entity for five years. So with the help of a smart accounting advisor, we came up with the idea of a “simultaneous incorporation,” in which a newly spun-out entity is legally incorporated at the time it receives the assets and stock of a qualifying business from the parent—and is tax-free under IRS rules. Liberty Media would hold the stakes in programming networks, including 50 percent of American Movie Classics, 16 percent of the Family Channel, and 30 percent of QVC, and interests in fourteen regional sports networks, as well as fourteen cable systems. TCI shareholders would get the “right” to buy one Liberty share for every two hundred shares of TCI they owned. And each right allowed an investor the option to swap in sixteen shares of TCI stock for a single share of Liberty Media. Liberty was expected to own 10 percent of TCI’s outstanding shares on a fully diluted basis."

"As chairman of the new company, I needed someone fast on their feet as president because I was still running TCI. Peter Barton had proven himself by launching CVN, negotiating with cities over tough franchise renewals, and adding levity in the awkward moments of deal discussions. He was a helluva salesperson, too, but he was terrible with numbers. How he got through Harvard Business School I have no idea. Nonetheless, I named Peter the CEO of Liberty Media under one condition: Robert “Dob” Bennett would be vice president and principal financial officer, and he would handle all financial details. Dob and Peter are about as different as people can be. Peter had the risk tolerance to think big, then move aggressively on a target acquisition. Dob, who had been director of finance at TCI since 1987 after leaving the Bank of New York, assiduously weighed the probability of success against the downside risks. But Dob and Peter worked together like they were brothers, occasionally bickering but silently complementing each other’s strengths. Sometimes one person can do two jobs. Other times, you need two people to do one. We tried to explain to investors that the Liberty spin-off would simplify the balance sheet, giving investors more choice on which part of the TCI empire they thought held more promise—pure distribution with TCI or more content with Liberty."

"It was kind of pathetic that this little toad of a company was all that seemed to fit my minimum conditions. Hoping he wouldn’t laugh at the idea, I told John Malone I’d take Silver King, but only if I could also get control of HSN itself (Malone’s Liberty Media owned a controlling stake in it, too). I still believed home shopping was the entrance to e-commerce. QVC had steadily taken market share from HSN, which had been mismanaged for many years and was losing money, but I knew enough about the category to be sure I could turn it around. The problem was that HSN had been accused of various fraudulent practices and was in a legal mess with the Justice Department. That asset was frozen for now, so my only option, pitiful as it was, was to take Silver King and await HSN’s unfreezing."

"I’d told Ralph and Brian that I’d promised myself to never again sign an employment agreement and that I’d report to a board, but not to an individual. QVC was a public company, and the other major owner was John Malone’s Liberty Media. Malone had become the overlord of cable media. He controlled the largest cable network, and with Liberty, he owned most of the programming. He was known both as the Cable Cowboy and, in a swipe from then–vice president Al Gore, as the Darth Vader of media. He was and always has been the smartest person in media, with an extraordinarily subtle and ingenious mind in the body of an outdoorsman conservationist libertarian who’s never met a tax he wanted to pay. I didn’t want to ever be stuck between them and would only agree to a three-way partnership where any two members could decide an issue, as long as I was one of the two. This made them more than uncomfortable, but I was adamant—I’d never do anything again where I wasn’t in some position of control."

"My taking over QVC was announced in December 1992. I agreed to purchase $25 million in common stock, or 3 percent of the company (with options to buy another 15 percent), and to form a partnership with Liberty Media, which would hold 21 percent of the stock, and Comcast, which would control 14 percent. *The New York Times* said, “People who know Mr. Diller and are familiar with the deal said that… he plans to turn the shopping channel into an on-line entertainment and merchandising service in which the subscriber and the cable company can freely interact.”"