Liberty Media’s Buffett Deal Opens Door for Braves or F1 Spinoff

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Liberty Media has the potential to create a spinoff of its sports assets, thanks to a string of recent moves.

The parent company of the Atlanta Braves and Formula One gained financial flexibility after selling 5.3 million of its Class A Liberty Sirius XM Group (NASDAQ: LSXMB) shares of trading stock ($50.02 per) to Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) earlier this month. Buffett’s holding company increased its stake in the $267 million deal and now owns nearly 20% of Liberty Sirius XM Group.

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Liberty CEO Greg Maffei confirmed on Thursday the deal pushed his company’s stake just above the 80% majority ownership threshold at Sirius (NASDAQ: SIRI) and makes all future distributions from Liberty Sirius XM Group to Sirius XM tax-free, according to Barron’s. It also will make the satellite radio company the conglomerate’s third actively traded business, after the Braves and F1, Maffei said.

He reiterated the structure of the tax-efficient Berkshire transaction provides flexibility to potentially do a public spinoff of its sports assets, though it isn’t likely to happen any time soon, according to Maffei.

“We have no plan or intent, but our whole goal is to try to maintain as much optionality and flexibility as possible,” Maffei said in an interview. “And transacting the way we did created more of that, so we liked it.”

Liberty has never owned all of Sirius XM, which is a separately traded public company. Colorado-based Liberty, which is controlled by cable television tycoon John Malone, was on its way to 80% ownership of Sirius shares, regardless, in large part due to its continued buyback strategy. But the stock swap deal with Berkshire made the difference in long-term wiggle room. Maffei says the transaction points to the overall “evolution” of the complex parent company.

Time will tell if this evolution includes the restructuring F1 and the reigning World Series champion Braves into a separate sports and entertainment division. Currently, Liberty is one of the only major public companies with three tracking stock groups (Liberty SiriusXM Group, Formula One Group and Braves Group).

Madison Square Garden Sports Corp., which owns the New York Knicks and NHL’s New York Rangers, completed the spinoff of its entertainment division last year. Madison Square Garden Entertainment Corp. (NYSE: MSGE) oversees the Garden, Las Vegas MSG Sphere and other venues. While that structure has its own complexities, it’s an example of how parent companies of franchises have responded to the climate.

The potential creation of separate companies isn’t merely tied to Liberty’s sports assets—it could affect others like Sirius or Tripadvisor—but a sports division isn’t inconceivable. While F1 has made serious strides, the Braves are likely to shatter their franchise revenue record in 2021.

Liberty bought the Braves from Time Warner for about $400 million back in 2007. The Braves are now worth $2.3 billion, according to Sportico’s latest MLB team valuations. Maffei downplayed rumors of Liberty potentially selling the Braves, who have one of Sinclair Broadcasting Group’s most profitable RSNs. He says the Braves’ players and team leadership have built an asset the company loves.

“We’re bullish on what (the Braves) can do there,” Maffei added. “We continue to build out (ballpark adjacent multi-use development) The Battery, and there’s a lot more upside.”

With assistance from Brendan Coffey.