Two Billionaire Media Moguls Seek a Deal in Expedia Stock Swap

(Bloomberg) -- Expedia Group Inc. offered to acquire Liberty Expedia in a stock swap that would simplify the online travel company’s ownership model and boost its value.

Terms of the deal haven’t been negotiated yet, but if successful, the transaction would streamline Expedia’s super-voting stock structure, which has long been divided between two 77-year-old billionaire media moguls: John Malone and Barry Diller.

Malone is worth $8.7 billion and chairs Liberty Global, a popular TV and broadband company, while Diller, chairman of Expedia and IAC/InterActiveCorp., has a fortune of $4.7 billion, according to the Bloomberg Billionaires Index.

Stemming from a deal made back in the 1990s, Malone has owned the super voting shares of Expedia through his holding company, Liberty Expedia. However, Diller has held the right to vote on Malone’s shares through an irrevocable proxy, which expires in May.

On Monday, Expedia said it approached Liberty to buy Malone’s stake back through a tax-free stock swap, according to a regulatory filing. If the transaction is agreed to, Liberty would become a wholly owned subsidiary of Expedia, according to a statement from Expedia.

"This is a useful piece of housekeeping for everyone involved," said James Ratcliffe, managing director and analyst at Evercore ISI. A deal is likely to be reached soon because the acquisition benefits both companies, he said.

The acquisition would "simplify everything" and result in a higher valuation for Expedia, said FBN Securities Inc. analyst Robert Routh. Currently, there are two different ways to invest in the same entity -- through Expedia and through Liberty.

"Simplification and elimination of a complicated control structure would result in a higher valuation post an all-stock transaction," Routh said. "We’ve seen that millions of times in the past. The only question is what’s the right value of the control shares."

According to Cowen & Co. analysts Kevin Kopelman and Emily Lavin, Expedia offered Liberty 19.9 million common shares, worth $2.45 billion and Liberty countered with 21.4 million shares, worth $2.64 billion.

Expedia has a convoluted ownership history, having originally been spun out of Microsoft Corp., then bought by Diller’s IAC/InterActiveCorp. and then spun out again into its own entity in 2004. This complex ownership structure contributes to a lower valuation than its chief rival, Booking Holdings Inc., analysts said.

“Expedia’s interest in buying back its stake from Liberty may help to narrow its valuation gap vs. rival Booking Holdings, in our view, as the company gains greater independence, ” said Bloomberg Intelligence analyst Mandeep Singh.

Diller said in the filing that the two companies would discuss terms of the deal over the next two days. Diller is expected to continue to be Expedia’s largest voting shareholder by exchanging shares of common stock he owns for shares of class B common stock, currently owned by Liberty, according to Expedia.

Expedia shares jumped 1.6 percent to $123.61 at 3:20 p.m. in New York and Liberty gained 3.7 percent to $43.88.

To contact the reporter on this story: Olivia Carville in New York at ocarville1@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Andrew Pollack

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