The Wall Street Journal today reports that the long-awaited deal between Time Warner and Liberty Media has been agreed to by the parties, with the sale of the Atlanta Braves as part of the complex deal. While the owners must approve the vote, Time Warner and Liberty have been working for months to finalize the deal with approx. $700 million in taxes saved in a transaction called a "cash-rich split-off". In tax terms, the deal is called a "Section 355" exchange, which exploits President Bush’s $40 billion Tax Increase Prevention and Reconciliation Act of 2005.
For Time Warner and Liberty Media to take advantage of the cash-rich split-off, the IRS requires that the parties complete the deal by May 17th as at that date tax laws that impact the entire affair change. After May 17th, the amount of monies that can be involved from a tax-free perspective will be lessened.
The deal was initially structured at $1.3 billion in cash and swap the Braves in return for 108 million of Liberty's 171 million Time Warner shares. The deal has been in renegotiations since the original agreement. Based on the closing price of Time Warner's stock Monday, the market value of those shares would be about $1.27 billion.
As mentioned, MLB owners must approve the deal in terms of the Braves. Some owners have been on record as being concerned about the corporate structure of the deal.
As reported by the Wall Street Journal:
The negotiations dragged on for months because of the tax implications and a recent surge in Time Warner's stock, which changed the valuation.
After reaching an initial agreement, the terms were renegotiated. Time Warner had previously agreed to pay $1.3 billion in cash and swap the Braves in return for 108 million of Liberty's 171 million Time Warner shares.
The two companies valued the Braves at about $460 million.
The AP further reports:
"We received certain of the sale documents today but have not yet reviewed them," said Bob DuPuy, baseball's chief operating officer, who could not confirm the deal had been agreed to.
He said baseball staff will go over the documents to make sure they meet baseball's usual sale rules.
"It will then go to the ownership committee, then will go to the executive council, then will go to the clubs," he said.
DuPuy said baseball officials have been advised that Terry McGuirk will remain in charge of the team after the sale.
For more details on the sale of the Braves on Baseball Prospectus :