Liberty Media Plans to Buy Associated Group

Liberty Media Group, the cable television programming company controlled by John Malone, agreed to buy Associated Group Inc. in a deal valued at $2.8 billion.

Associated is a Pittsburgh-based investment group whose largest asset is a 41% stake in Teligent, a Vienna, Va.-based provider of mostly local telephone and Internet services over wireless antennas for businesses.

Teligent, which competes with Bell Atlantic Corp. and other traditional local phone companies that provide services over wire networks, now provides service in 26 markets and expects to be in 40 by the end of the year.

Liberty, which takes a portfolio approach to its media investments, said the transaction was financially rather than strategically motivated.

Malone has access to a stockpile of cash since AT&T; paid $59.4 billion in March to buy Tele-Communications Inc., the cable giant he controlled. Though Malone controls Liberty, it technically is a subsidiary of AT&T.;

AT&T; said its role in the Associated transaction was limited to a share exchange for Associated’s stake in AT&T; to make the agreement tax-free for shareholders.

Through Liberty, Malone, who is known for his complicated financial maneuvers and his aversion to paying taxes, has investments in dozens of cable channels, including Discovery Networks, QVC and BET, and in media companies such as Time Warner, News Corp. and USA Networks.

Lately, Liberty has concentrated on investments with potential to benefit from the convergence of television and computers. It owns 21% of General Instrument, the manufacturer of advanced set-top cable boxes that will eventually feature interactive television, home shopping and banking, Web surfing, video-on-demand and e-mail. It has taken stakes in Internet ventures such as Priceline.com and IVillage, whose niches may translate to television.

Some analysts said Teligent has some strategic value, giving Liberty a means of distributing data to businesses, despite Malone’s emphasis on the video side of the programming business.

Malone became AT&T;’s largest individual shareholder when AT&T; bought Liberty’s parent company, Tele-Communications Inc.--the No. 2 U.S. cable television company--in March and created a separate stock to track Liberty. Although AT&T; legally owns Liberty’s assets, Liberty has separate shareholders and Malone and his management team have control of operations.

AT&T; said it has no agreement to use Teligent’s network and declined to comment on any plans.

Teligent shares rose $5.44 to close at $54.56 on speculation the company could lead to closer relationship between Teligent and AT&T; or that it could be sold by Liberty.

Associated shareholders will get 0.6206 Liberty class A share and 0.4727 AT&T; share, or a total of $67.14, for each share. That’s a premium of 3.3% to Friday’s close of Associated class A shares and 9.2% for class B. Liberty will assume $187 million in debt.

Associated class A shares fell $2.75 to close at $62.25, and class B rose 25 cents to close at $61.75. Englewood, Colo.-based Liberty Class A shares fell 19 cents to close at $66.25, while New York-based AT&T; fell 44 cents to close at $55.06.