Investments In Available-For-Sale Securities And Other Cost Investments
|12 Months Ended|
Dec. 31, 2016
|Investments in Available-for-Sale Securities and Other Cost Investment|
|Investments in Available-for-Sale Securities and Other Cost Investments||
(7) 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 Company previously had 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 those 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 has elected to account for those of its AFS securities which it considers to be non-strategic ("Fair Value Option Securities") at fair value. 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 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 transactions contemplated by the first purchase agreement were 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 that was repaid by Liberty to selling stockholders upon completion of the Second Closing). On October 27, 2016, under the terms of the first purchase agreement, Liberty acquired an additional $13 million 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. Liberty acquired 100% of the fully diluted equity interests of Delta Topco, other than a nominal number of shares held by certain Formula 1 teams, in the Second Closing. Prior to the Second Closing, CVC continued to be the controlling shareholder of Formula 1, and Liberty did not have any voting interests or board representation in Formula 1. As a result, we concluded that we did not have significant influence over Formula 1, and therefore our initial investment in Formula 1 was accounted for as a cost investment until the completion of the Second Closing, at which time we began consolidating Formula 1.
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 $5.0 billion consideration was comprised of $3.05 billion of cash, $1.6 billion represented by approximately 56 million newly issued shares of Series C Liberty Formula One common stock and a $351 million debt instrument issued by Delta Topco and exchangeable into shares of Series C Liberty Formula One common stock.
In connection with the transaction, Liberty entered into a $500 million margin loan on November 8, 2016, secured by shares of Live Nation and Viacom public equity securities held by Liberty (the ‘‘Live Nation Margin Loan’’). No amounts were drawn on the Live Nation Margin Loan at December 31, 2016. Liberty drew approximately $350 million to use for the purchase of Formula 1, on January 23, 2017, leaving $150 million available to be drawn. See note 10 for additional discussion regarding the Live Nation Margin Loan.
At the Second Closing, the cash component of the consideration payable to the selling shareholders in the Formula 1 acquisition was increased by $1.55 billion, the amount paid by certain third party investors in exchange for 62 million newly issued shares of Series C Liberty Formula One common stock to certain third party investors at a price per share of $25.00. The issuance of these shares was consummated concurrently with the Second Closing on January 23, 2017. These newly issued shares of Series C Liberty Formula One common stock are subject to market co-ordination and lock-up agreements. As a result, the stock component of the consideration payable to the selling shareholders in the Formula 1 acquisition was decreased by 62 million shares.
Also concurrently with the Second Closing, the Company used a portion of the net proceeds of its $450 million cash convertible senior notes offering, as discussed in note 10, to increase the cash consideration payable to the selling shareholders by approximately $400 million and retain in treasury the approximately 19 million shares of Series C Liberty Formula One common stock that would otherwise have been issued to the selling shareholders based on the per share purchase price of $21.26. These shares of Series C Liberty Formula One common stock will be reserved by the Company for possible sale to the Formula 1 teams. To the extent such shares are not sold to Formula 1 teams within six months following the Second Closing, the shares will be retired.
In connection with the Second Closing, Delta Topco issued $351 million subordinated exchangeable notes, upon the conversion of certain outstanding Delta Topco loan notes, that bear interest at 2% per annum and mature in July 2019, exchangeable into cash or newly issued shares of Series C Liberty Formula One common stock. See note 10 for additional discussion of this debt instrument.
Unrealized Holding Gains and Losses
There were no unrealized holding gains or losses related to investments in AFS securities at December 31, 2016 or 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.