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TMFDeej (99.47)

An odd situation, Liberty Acquisition's purchase of Spain Promotora de Informaciones

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August 16, 2010 – Comments (5) | RELATED TICKERS: LIA.DL

So I was going through the recent 13F aka holdings filing for Whitney Tilson's T2 Partners Hedge Fund that just came out today and I noticed that one of the fund's newest and largest holdings is good old John Malone's Liberty Acquisition Holdings Corp. (LIA).

With tracking stocks, mergers, spin-offs, etc... Mr. Malone has never met a confusing situation that he didn't like.  This one doesn't seem to be any different.  That's probably a good thing because confusion often creates opportunity.

I am looking up all of this as I go along and thinking out loud here so bear with me.
I am not familiar with Liberty Acquisitions but from what I can gather it is a U.S. Special Purpose Acquisition Company set up by Malone to make well um acquisitions.  I believe that the opportunity with LIA surrounds its acquisition of a debt-laden Spanish media company called Spain Promotora de Informaciones aka "Prisa."

The companies recently announced a revised merger agreement.  Supposedly this new merger agreement is more attractive for Liberty Acquisition shareholders.  For every LIA share, they are eligible to receive 1.5 Prisa Class A ordinary shares, 3.0 Prisa Class B non-voting convertible shares or NVCS, and $0.50 in cash in exchange for each share of Liberty common stock held. These shares do not currently trade on U.S. listed exchanges, but Prisa plans to create ADS for them in the near future.  Each of the Class B shares is mandatorily convertible in 3.5 years and is entitled to receive EURO0.175 of minimum dividends per annum, which are cumulative until mandatory conversion subject to the existence of distributable profits or Class B share premium reserve.

Clear as mud right?  I actually believe that T2 bought the LIA warrants.  The warrants will receive 0.45 Prisa Class A ordinary shares and $0.90 in cash in exchange for each warrant they hold.  That seems a little simpler to me.  I wonder is the price per Class A share is related to Prisa's pink sheet listing or if it is a direct translation of its share price listed on some sort of Euro exchange? Here's a link to the pink sheet quote for Prisa:

http://finance.yahoo.com/q?s=GPOPF.PK

At $2.55/share times 0.45 shares PLUS $0.90 in cash per LIA warrant we're talking about $2.0475/share worth of Prisa and Cash for each warrant which is currently trading at only $1.35. That amounts to a nearly instantaneous 50% return when this transaction is consummated, assuming that there's no move in Prisa's share price...which is a big assumption.

If T2 finds this situation interesting, there might be something here.  Who knows when they bought their shares though.  Since this 13-F is from Q2 it certainly was before the amended agreement was announced on August 4th.  I'm going to have to look around for more information on this situation.  Having said that, I'm certainly not going to just assume that this is a good deal because T2 is doing it and jump right in without understanding it.

Is anyone out there familiar with Liberty Acquisition in general or specifically the Prisa acquisition?

Deej

5 Comments – Post Your Own

#1) On August 16, 2010 at 2:55 PM, TMFDeej (99.47) wrote:

BTW, it looks as though this deal entitles Liberty Acquisition to a 50% stake in Prisa, not complete ownership.
Deej

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#2) On August 16, 2010 at 3:02 PM, TMFDeej (99.47) wrote:

It sounds like the revised deal is set to take place some time in October.

Deej 

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#3) On August 16, 2010 at 3:27 PM, Regal78 (< 20) wrote:

This situation has nothing at all to do with John Malone.  A brief review of any of the filings would have alerted you to this.  The merger is essentially a recapitalization of PRS where LIA gets equity in return.  I know this situation well, feel free to contact me.

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#4) On August 16, 2010 at 4:20 PM, TMFDeej (99.47) wrote:

Hi Regal.  Thanks for your comments.  I did say "I am looking up all of this as I go along and thinking out loud here so bear with me."  Liberty Acquisition might not have anything to do with Malone now, but I'd be surprised if he didn't start it.  That's the name that us uses for all of his companies.

Besides, who cares?  I wouldn't care if  Santa Claus owned LIA as long as the potential to make money on its acquisition of Prisa existed.

The way I interpret the deal is Prisa had too much debt so it agreed to give 50% of its company to Liberty Acquisition in exchange for several hundred million dollars.  

If you are very familiar with the situation Regal, I'd love to hear your thoughts on whether the Liberty Acquisition Warrants are indeed an attractive opportunity right now.  That's why I made this post, not to act like an authority on the deal but to ask others for their feedback.

Deej 

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#5) On August 16, 2010 at 4:45 PM, Regal78 (< 20) wrote:

I just wanted to make it clear Malone has nothing to do with this, I think that it an important fact to clarify given that he is such a polarizing figure.  So I care who is running running LIA, and since making money on this situation is contingent on the deal closing, you should care too.  This deal has gone through multiple iterations and is very complex so it certainly matters who is steering the ship.  Thankfully the LIA sponsors are very capable.  Didn't mean to jump on you about that, just wanted to make sure it was out there. 

Yes, the warrants are an extremely compelling opportunity at these prices.  IMO, this type of thing doesn't come along too often.  Essentially, because of dilution effects with pro forma Prisa and the current controling PRS shareholder wanting to stay at a 30% stake, the LIA warrant holders are essentially getting paid to renounce their future conversion rights.  Given the $500m backstop and the additional $300m in the LIA trust, the risk of the deal not closing is diminimus. 

I also think a recapitalized Prisa is a fantastic long term investment as well, especially because you are creating it so cheaply via the warrants, but even if you are only in it for a trade until deal close it makes all the sense in the world.

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