Liberty Media, TCI Ventures to Merge

Tele-Communications Inc. is proposing to combine its Liberty Media programming unit and TCI Ventures, which manages its outside investments, in a new company to be headed by TCI Chairman John Malone.

The plan, which involves a $6.4-billion stock swap, was announced in conjunction with AT&T; Corp.’s agreement to buy Tele-Communications. As with many of Malone’s deals over the years, the complexity of the proposal puzzled even experienced analysts.

While the combination isn’t contingent on the AT&T-TCI; merger, the new Liberty Media Group ultimately would be represented by a new class of AT&T; shares.

Malone’s plans for Liberty include forming a finance unit similar to GE Capital Corp., a unit of General Electric Co. With about $5.5 billion of cash, the unit could provide capital for a combined AT&T-TCI; to expand its services, invest in new cable programs and help develop Internet services.

Although Malone didn’t specify what type of leasing would be involved, TCI has considered setting up such a venture to finance the purchase of the millions of digital cable set-top boxes that the cable company expects to deploy .

The new Liberty Media would combine all of TCI’s non-cable businesses and interests, including stakes in an electronic TV-listings provider, new-technology development and its programming holdings. Liberty Media and TCI Ventures today have a combined market value of about $20.9 billion.

The proposed merger of Liberty and TCI Ventures calls for swapping each of TCI Ventures’ Class A and B shares for 0.52 share of Liberty Media Class A and B.

Liberty Media Class A shares rose $2.13 to $38.19 and the B shares rose $2.44 to $38.81 on Nasdaq. TCI Ventures A shares rose $1.63 to $19 and the B shares rose $1.69 to $18.81. The new Liberty Media Group unit would then swap its shares for a new class of AT&T; share that would track its performance. AT&T; wouldn’t own any of the shares in Liberty, whose board of directors and management would be controlled by Malone.

The combination enables Malone, 57, to retain control of TCI’s vast programming assets, which include stakes in the Discovery Channel, Encore Media and Liberty Fox Sports, as well as United Video Satellite, which has a pending $2-billion agreement to buy TV Guide.

As part of the AT&T-TCI; deal, Malone said AT&T; promised to make Liberty its preferred vendor for cable TV programming.