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Liberty Interactive Corp announced today plans to split itself into two separate tracking stocks, one for West Chester-based QVC and another for its other ecommerce holdings.
QVC Group, which will begin trading next year, will also include Liberty Interactive's 38% stake in HSN Inc. (formerly Home Shopping Network). The possibility of Liberty Interactive buying the rest of HSN and merging it with QVC has often been discussed by Liberty management and others.
Liberty Interactive Chairman John C. Malone has been a long-time fan of tracking stocks and frequently creates new ones as he sees the need arise. Tracking stocks can provide investor focus on a particular sector, financial flexibility, and possible tax advantages. Tracking stocks track the performance of a particular unit of a corporation without giving the holder a claim on the underlying assets of the unit or parent company. Liberty Interactive was already traded through a tracking stock, Liberty Interactive Group (LINTA).
This move reflects the parent company's previously stated desire to increase the strategic
focus on and visibility of QVC as a distinct entity. It also may open the door to other strategic transactions, including perhaps a deal with HSN.
But QVC has not really been a growing business for some time ($2 billion revenue in Q2 2013 vs. $1.8 billion in Q2 2010) , in spite of expansion into Italy and China. While broadcast remains an essential platform for it, QVC sees itself increasingly as an ecommerce company, with website orders now accounting for 42% of revenue, and two-thirds of that coming via mobile.
Liberty Interactive (NASDAQ: LINTA) currently has a market capitalization of $12.8 billion. HSN Inc.'s market capitalization is $2.77 billion, which would put the value of LINTA's 38% stake at about $1 billion (which should already be reflected in LINTA's market cap).