U.S. Court Sides with Liberty Media

Liberty Media Corp. (LMCA - Analyst Report) has won a key verdict related to its allegations against Vivendi Universal S.A for ambiguous transaction while acquiring USA Network in 2001. The U.S. district court ruled that Liberty Media will receive a damage amount of nearly $1 billion (inclusive of interest beginning from 2001) from Vivendi.

However, Vivendi now plans to appeal before the jury in order to contest this verdict in higher court. The company stated that it has not committed any wrong and will defend itself ‘to the fullest extent possible’.

It all began in 2001 when Vivendi bought the USA Network for $10.3 billion from Liberty Media. During the transaction, Vivendi was alleged to have understated its financial position, hence allowing them to make the payment by transferring 37.2 million treasury shares to Liberty Media.

However, the deal turned sour when Liberty Media discovered that the shares received from Vivendi were overvalued at the time of transaction. Thus, Liberty Media filed a lawsuit against them asking for penalty.

At the end of the third quarter of 2012, Liberty Media had $2,943 million of cash and cash equivalents. So, if the company is successful in receiving payment of nearly $1 billion from Vivendi, it will certainly boost its liquidity. Moreover, the company can use that excess cash to further increase its stake in SIRIUS XM Radio Inc. (SIRI - Analyst Report), as Liberty Media is presently planning to take full control of the provider of satellite radio services.

We maintain our long-term Neutral recommendation on Liberty Media. Currently, it holds a short-term Zacks Rank #3 (Hold).