Liberty Media want F1 internet streaming service

Liberty Media are keen to introduce a direct-to-consumer web based streaming service featuring Formula 1 races and news once the the John Malone-controlled company acquires the sport.

Liberty CEO Greg Maffei told analysts during the company’s quarterly earnings call that they are “very excited about the idea” of a Formula 1 streaming service which “makes a lot of sense for them and us.”

He acknowledged that it might take time as there are “things to be worked through” to clarify the rights that are available from the Bernie Ecclestone’s deals that Formula 1 and its teams have with broadcasters.

But Maffei added with confidence, “I don’t think it’s insurmountable.”

Liberty Media recently purchased 19.1% of Formula 1, in a deal which will give the company full control next year when they acquire the balance.

Maffei said that Live Nation, the live entertainment company in which Liberty owns a 34% stake, “can be helpful to Formula One.”

He cited the example that it could sell tickets through its Ticketmaster subsidiary, help set up venues, and stage concerts around races. A concept similar to the Taylor Swift concert at Circuit of the Americas, during the United States Grand Prix.

The Liberty CEO added that streaming services are “seeing some traction” but also stated that “we don’t yet see wholesale substitution” for traditional pay TV which is the cash cow of Formula 1 currently.

Maffei and other executives will have more to say on the matter this Thursday when Liberty holds its annual Investor Day gathering in New York.

F1 Acquisition as detailed in Liberty Media Corporation Reports Third Quarter 2016 Financial Results:

On September 7, 2016, Liberty entered into two agreements relating to the acquisition of F1, a global motorsports business. The first stock purchase agreement was completed on September 7, 2016 and provided for the acquisition of an 18.7% fully diluted minority stake in Delta Topco Limited, the parent company of F1 (Delta Topco herein referred to as “F1”), for $746 million in cash.

Also pursuant to the first purchase agreement, on October 27, 2016, Liberty acquired an additional 0.4% equity interest in F1 for approximately $13 million in cash, increasing its stake to approximately 19.1% on a fully diluted basis. Liberty’s interest in F1 is attributed to the Liberty Media Group. Liberty expects to acquire 100% of the fully diluted shares of F1, other than a nominal number of shares held by certain F1 teams, in a closing under the second purchase agreement (and following the unwind of the first purchase agreement) during the first quarter of 2017.

At the second closing, Liberty’s interest in F1, along with existing F1 cash and debt (which will be non-recourse to Liberty), will be attributed to the Liberty Media Group. Liberty’s minority stake in F1 is currently being accounted for as a cost investment until completion of the second closing, at which point Liberty expects to consolidate F1.

The transaction price for the acquisition represents an enterprise value for F1 of $8.0 billion and an equity value of $4.4 billion, calculated at the time of the first closing in September 2016. The aggregate consideration is comprised of $1.1 billion in cash (which includes the cash consideration already paid to the selling shareholders under the first purchase agreement), up to 138 million newly issued shares of Liberty’s Series C Liberty Media common stock (“LMCK”) and approximately $351 million in exchangeable debt instruments to be issued by Delta Topco Limited and exchangeable into LMCK shares.

Funding for the remaining cash component of the acquisition is expected to come from cash on hand at the Liberty Media Group and liquidity from a $500 million margin loan with shares of Live Nation and Viacom common stock pledged as collateral, expected to close this week. The newly issued LMCK shares will be subject to market co-ordination and lock-up agreements.

Liberty has agreed to use its reasonable endeavors between the first and second closing to secure commitments from certain third party investors to purchase a portion of the LMCK shares that are otherwise deliverable to the selling shareholders at a price per share no less than the LMCK transaction reference price of $21.26, subject to certain exceptions.

If shares are issued to third party investors, the proceeds of such investment (net of selling expenses) will be used to increase the cash consideration paid to the selling shareholders and the number of LMCK shares issued to selling shareholders will be reduced. Liberty Media will not retain any proceeds from any sale to third party investors.

The second closing is not conditioned upon the consummation of any third party investment. The maximum aggregate number of LMCK shares to be issued to the selling shareholders and the third party investors at the second closing is approximately 138 million shares.

The second closing is subject to the satisfaction of certain conditions, including (i) anti-trust approval, (ii) a Liberty Media Corporation shareholder vote approving the issuance of the LMCK shares at the second closing, and (iii) certain third party consents including approval of the FIA, the F1 governing body.

It is expected that the Liberty Media Group will be renamed the Formula One Group upon completion of the second closing (subject to stockholder approval of the name change, which Liberty has agreed to use its reasonable endeavors to obtain), and the ticker symbols for the Series A, Series B and Series C Liberty Media Group tracking stocks will be changed from LMC (A/B/K), respectively, to FWON (A/B/K), respectively.