CWC merger / John Malone liked LiLaC more than Global

I tried to figure out what the CWC merger structure was about.  You can access my spreadsheet here: https://docs.google.com/spreadsheets/d/1c_31Z-eoxXAPc1TfeOMjgdirZu-nk54DHwGKXSlOao8/edit?usp=sharing

Summary:

• The way the merger is structured is that the Recommended Offer gives you the most value from a merger arbitrage perspective.  However, you will get a very low mix of LiLaC shares.  What Malone is doing here is luring institutional investors into taking a high proportion of Global shares rather than taking (relatively) undervalued LiLaC shares.
• Since the merger details were announced, Liberty Global has fallen by about a fifth.  So you should do your own homework as to the relative valuation between Global and LiLaC.

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Live Nation (LYV) – Part 1 – Ticketing overview

Live Nation has various business lines associated with live music and live events.  They are pursuing a strategy of vertical integration, trying to find synergies between the various parts of their business.  On the concerts business side, the vertical integration strategy has been tried multiple times with little success.  Will this time be any different?  John Malone seems to think so.  Liberty Media has been buying more Live Nation shares.

Let’s start with an overview of the ticketing industry.

Ocwen/Altisource: What went wrong

Lessons learned:

1. Regulators are difficult to predict.
2. Don’t underestimate the amount of damage that a regulator can do.
3. Use small position sizes for companies with potentially nasty regulatory risk.

While I was always aware of #1, #2 is what really got me into trouble.  Due to the actions of the NY DFS, I do not see the subprime mortgage servicing industry as an attractive one.  Lawsky may succeed in regulating away the industry’s profitability and crippling the growth of subprime servicers.

Tracking John Malone (Part 5) – Nov 2014 update + Why control matters

John Malone continues to create more tracking stocks and spinoffs.  Click the diagram below for a larger image.

Notes on cable – Part 2 – The future

I think that it’s likely the following trends will play out in the future:

• On-demand television will become widespread because it is the most compelling delivery mechanism.
• Technologies incapable of on-demand viewing (terrestrial broadcasting, satellite) will become less profitable.
• High-speed Internet providers (cable and telcos) will be able to exercise increasing pricing power over their customers.

Book summary: A Curious Discovery

John Hendricks, the founder of the Discovery Channel (DISCA/B/K), wrote a book on his life story.  Here are my key takeaways from the book.

Thoughts on LVNTA, LINTA, LTRPA

Liberty Ventures is currently in the process of spinning off Liberty TripAdvisor Holdings.

• TripAdvisor shares (normal shares and supervoting shares) will go from Ventures to TripAdvisor Holdings.
• Holdings will take out a $400M margin loan.
• Holdings will pay Interactive $350M for BuySeasons.  (EDIT:  This may be wrong.  See the bottom of this post.)  It will hang onto $50M.

I don’t think that Interactive, Ventures, or TripAdvisor will be that attractive.  TripAdvisor has extremely high growth and seems to be a wonderful business.  However, its multiple is very high (a P/E ratio of 66).  I think that Malone may sell his personal stake in TripAdvisor for something cheaper.