Investments In Available-For-Sale Securities And Other Cost Investments
|9 Months Ended|
Sep. 30, 2016
|Investments in Available-for-Sale Securities and Other Cost Investments [Abstract]|
|Investments in Available-for-Sale Securities and Other Cost Investments||
(6) Investments in Available-for-Sale Securities and Other Cost Investments
All marketable equity and debt securities held by the Company are classified as available-for-sale ("AFS") and are carried at fair value generally based on quoted market prices. GAAP permits entities to choose to measure many financial instruments, such as AFS securities, and certain other items at fair value and to recognize the changes in fair value of such instruments in the entity's statement of operations (the "fair value option"). The Company previously entered into economic hedges for certain of its non-strategic AFS securities (although such instruments were not accounted for as fair value hedges by the Company). Changes in the fair value of these economic hedges were reflected in the Company's statement of operations as unrealized gains (losses). In order to better match the changes in fair value of the subject AFS securities and the changes in fair value of the corresponding economic hedges in the Company's financial statements, the Company elected the fair value option for those of its AFS securities which it considers to be non-strategic ("Fair Value Option Securities"). Accordingly, changes in the fair value of Fair Value Option Securities, as determined by quoted market prices, are reported in realized and unrealized gains (losses) on financial instruments in the accompanying condensed consolidated statements of operations.
Investments in AFS securities, including Fair Value Option Securities separately aggregated, and other cost investments are summarized as follows:
On September 7, 2016 Liberty, through its indirect wholly owned subsidiary Liberty GR Cayman Acquisition Company, entered into two definitive stock purchase agreements relating to the acquisition of Delta Topco, the parent company of Formula 1, a global motorsports business, from a consortium of sellers led by CVC Capital Partners (“CVC”). The first purchase agreement was completed on September 7, 2016 and provided for Liberty’s acquisition of slightly less than a 20% minority stake in Formula 1 on an undiluted basis for $746 million, funded entirely in cash (which is equal to $821 million in consideration less a $75 million discount to be repaid by Liberty to selling stockholders upon completion of the acquisition). On October 27, 2016, under the terms of the first purchase agreement, Liberty acquired an additional incremental equity interest of Delta Topco, maintaining Liberty’s investment in Delta Topco on an undiluted basis and increasing slightly to 19.1% on a fully diluted basis. It is expected that Liberty will acquire 100% of the fully diluted equity interests of Delta Topco, other than a nominal number of shares held by certain Formula 1 teams, in a closing under the second purchase agreement (and following the unwind of the first purchase agreement) upon the satisfaction of certain conditions described in more detail below. Prior to completion of the second closing, CVC will continue to be the controlling shareholder of Formula 1, and Liberty will not have any voting interests or board representation in Formula 1. As a result, we have concluded that we do not have significant influence over Formula 1, and therefore our investment in Formula 1 will be accounted for as a cost investment until the completion of the second closing, at which time we expect to consolidate Formula 1. The second closing is expected to occur in the first quarter of 2017.
The $8.0 billion transaction price for the acquisition represents an enterprise value for Formula 1 of approximately $8.0 billion and an equity value of approximately $4.4 billion, calculated at the time of the first closing. The consideration comprises cash and newly issued shares of Series C Liberty Media Group tracking stock (LMCK) and a debt instrument exchangeable into LMCK shares. In the acquisition the selling stockholders will receive a mix of consideration comprising $1.1 billion in cash (including the cash consideration delivered to certain selling shareholders of Delta Topco under the first stock purchase agreement on September 7, 2016 and October 27, 2016), 138 million newly issued shares of LMCK and an approximately $351 million exchangeable debt instrument to be issued by Delta Topco and exchangeable into shares of LMCK. Funding for the cash component of the acquisition is expected to come from cash on hand at the Liberty Media Group, debt financing backed by some of our public equity securities and potential liquidity from Liberty Media Group’s portfolio of public equity securities. The newly issued LMCK shares will be subject to market co-ordination and lock-up agreements. If the acquisition is completed, the consortium of sellers led by CVC will own approximately 65% of the pro forma equity interest in the then re-named Formula One Group, inclusive of the dilutive effect of the exchangeable debt instrument (based on the number of shares outstanding on July 31, 2016), and will have board representation at Formula 1.
The completion of the acquisition is subject to certain conditions, including the receipt of: (i) certain clearances and approvals by antitrust and competition law authorities in various countries, (ii) certain third-party consents and approvals, including that of the Fédération Internationale de l'Automobile, the governing body of Formula 1, and (iii) the approval of Liberty's stockholders of the issuance of LMCK shares in connection with the acquisition. Liberty has agreed to use its reasonable endeavors to solicit proxies to approve the issuance of LMCK shares in connection with the acquisition and to approve the name change of the Liberty Media Group to the Formula One Group. Additional information regarding the acquisition of Formula 1 will be included in a proxy statement to be filed by Liberty with the SEC (a preliminary filing of which has been made) relating to the matters to be voted upon by Liberty's stockholders described above.
Unrealized Holding Gains and Losses
There were no unrealized holding gains and losses related to investments in AFS securities as of September 30, 2016 or December 31, 2015.
Investments in Available-for-Sale Securities and Other Cost Investments [Abstract]
No definition available.
Investments in available-for-sale securities and other cost investments (Table)
No definition available.