1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 1994
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
Rule 13e-3 Transaction Statement (Pursuant to Section
13(e) of the Securities Exchange Act of 1934)
QVC, INC.
(Name of Issuer)
QVC, INC.
QVC PROGRAMMING HOLDINGS, INC.
COMCAST CORPORATION
TELE-COMMUNICATIONS, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
747262 10 3
(CUSIP Number of Class of Securities)
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NEAL S. GRABELL STANLEY L. WANG STEPHEN M. BRETT
QVC, INC. COMCAST CORPORATION TELE-COMMUNICATIONS, INC.
1365 ENTERPRISE DRIVE 1500 MARKET STREET 5619 DTC PARKWAY
WEST CHESTER, PA 19380 PHILADELPHIA, PA 19102 ENGLEWOOD, CO 80111
(610) 430-1000 (215) 981-7510 (303) 267-5500
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
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Copies to:
PAMELA S. SEYMON DENNIS S. HERSCH FREDERICK H. MCGRATH
WACHTELL, LIPTON, ROSEN & KATZ DAVIS POLK & WARDWELL BAKER & BOTTS, L.L.P.
51 WEST 52ND STREET 450 LEXINGTON AVENUE 885 THIRD AVENUE
NEW YORK, NY 10019 NEW YORK, NY 10017 NEW YORK, NY 10022
(212) 403-1000 TELEPHONE: (212) 450-4000 (212) 705-5000
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AUGUST 11, 1994
(Date Tender Offer First Published, Sent, or Given to Securityholders)
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This Rule 13E-3 Transaction Statement (the "Statement") relates to a tender
offer by QVC Programming Holdings, Inc., a Delaware corporation (the
"Purchaser") to be wholly owned by Comcast Corporation, a Pennsylvania
corporation ("Comcast") and Liberty Media Corporation, a Delaware corporation
("Liberty" and, together with Comcast the "Parent Purchasers") and a
wholly-owned subsidiary of Tele-Communications, Inc. ("TCI") to purchase all
outstanding shares (the "Shares") of Common Stock, $.01 par value per share (the
"Common Stock") and Series B Preferred Stock and Series C Preferred Stock, each
$.10 par value per share (together, the "Preferred Stock"), of QVC, Inc., a
Delaware corporation (the "Company"), at $46 per share of Common Stock and $460
per share of Preferred Stock, net to the seller in cash without interest
thereon, on the terms and subject to the conditions set forth in the Purchaser's
Offer to Purchase dated August 11, 1994 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer"). The Offer
is being made pursuant to an Agreement and Plan of Merger dated as of August 4,
1994 (the "Merger Agreement"), which provides, among other things, that as
promptly as practicable after the satisfaction or, if permissible, waiver of the
conditions set forth therein, a wholly-owned subsidiary of the Purchaser will be
merged with and into the Company (the "Merger"), with the Company continuing as
the surviving corporation, and outstanding Shares will be converted into rights
to receive $46 (in the case of shares of Common Stock) or $460 (in the case of
shares of Preferred Stock) in cash or any higher price that may be paid per
share of Common Stock or Preferred Stock, as the case may be, in the Offer.
Copies of the Offer to Purchase and the related Letter of Transmittal are filed
by the Purchaser as Exhibits (a)(1) and (a)(2), respectively, to the Schedule
14D-1 (the "Schedule 14D-1") which was filed by the Purchaser, Comcast and TCI
with the Securities and Exchange Commission (the "Commission") contemporaneously
with this Statement.
This Statement is being filed jointly by the Company, the Purchaser,
Comcast and TCI. By filing this Schedule 13E-3, none of the joint signatories
concedes that Rule 13e-3 under the Securities Exchange Act of 1934 is applicable
to the Offer, the Merger or other transactions contemplated by the Merger
Agreement.
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The cross reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Schedule 14D-1 of
the information required to be included in response to the items of this
Statement. The information in the Schedule 14D-1, including all Exhibits
thereto, is hereby expressly incorporated herein by reference and the responses
to each item in this Statement are qualified in their entirety by the
information contained in the Schedule 14D-1.
CROSS REFERENCE SHEET
WHERE LOCATED IN WHERE LOCATED IN
ITEM IN SCHEDULE 13E-3 SCHEDULE 14D-1
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Item 1(a)................................................... Item 1(a)
Item 1(b)................................................... 1(b)-(c)
Item 1(c)................................................... 1(c)
Item 1(d)-(f)............................................... *
Item 2...................................................... Item 2
Item 3(a)................................................... Item 3(a)-(b)
Item 3(b)................................................... *
Item 4...................................................... *
Item 5(a)-(f)............................................... Item 5
Item 5(g)................................................... *
Item 6(a)................................................... Item 4(a)
Item 6(b)................................................... *
Item 6(c)................................................... Item 4(b)
Item 6(d)................................................... **
Item 7(a)................................................... Item 5
Item 7(b)-(d)............................................... *
Item 8...................................................... *
Item 9...................................................... *
Item 10..................................................... Item 6
Item 11..................................................... Item 7
Item 12..................................................... *
Item 13(a).................................................. *
Item 13(b)-(c).............................................. **
Item 14..................................................... *
Item 15(a).................................................. *
Item 15(b).................................................. Item 8
Item 16..................................................... Item 10(f)
Item 17(a).................................................. **
Item 17(b).................................................. *
Item 17(c).................................................. Item 11(c)
Item 17(d).................................................. Item 11(a)
Item 17(e).................................................. *
Item 17(f).................................................. **
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** The information requested by this Item is not required to be included in the
Schedule 14D-1.
** The Item is inapplicable or the answer thereto is in the negative.
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ITEM 1. ISSUER AND CLASS OF SECURITIES SUBJECT TO THE TRANSACTION.
(a) The answer to Item 1(a) of the Schedule 14D-1 is incorporated herein by
reference.
(b) The answers to Items 1(b) and 1(c) of the Schedule 14D-1 are
incorporated herein by reference.
(c) The answer to Item 1(c) of the Schedule 14D-1 is incorporated herein by
reference.
(d)-(e) The information set forth under "Special Factors -- Interests of
Certain Persons in the Transaction", "The Tender Offer -- 5. Price Range of
Shares; Dividends" in the Offer to Purchase is incorporated herein by reference.
(f) The information set forth under "Special Factors -- Interests of
Certain Persons in the Transaction" in the Offer to Purchase is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
The answer to Item 2 of the Schedule 14D-1 is incorporated herein by
reference. One of the persons filing this statement is the issuer of the class
of equity securities which is the subject of the Rule 13e-3 transaction.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) The answer to Item 3(a)-(b) of the Schedule 14D-1 is incorporated
herein by reference.
(b) The information set forth under "Introduction", "Special
Factors -- Background of the Transaction", "-- Purpose of the Transaction" and
"The Tender Offer -- 7. Certain Information Concerning the Purchaser and Parent
Purchasers" in the Offer to Purchase is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth under "Introduction", "Special Factors -- The
Merger Agreement", "-- The Merger Agreement", "-- Dissenters Rights",
"-- Certain Effects of the Transaction", "The Tender Offer -- 1. Terms of the
Offer", "-- 2. Acceptance for Payment and Payment", "-- 3. Procedure for
Tendering Shares", "-- 4. Withdrawal Rights" and "-- 10. Certain Conditions of
the Offer" in the Offer to Purchase is incorporated herein by reference.
(b) The information set forth under "Introduction", "Special
Factors -- Background of the Transaction", "-- Fairness of the Transaction",
"-- Interests of Certain Persons in the Transaction", "-- The Merger Agreement",
"-- Dissenters Rights", "-- Certain Tax Consequences" and "-- Certain Effects of
the Transaction" in the Offer to Purchase is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(g) The answer to Item 5 of the Schedule 14D-1 is incorporated herein
by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The answer to Item 4(a)-(b) of the Schedule 14D-1 is incorporated
herein by reference.
(b) The information set forth under "The Tender Offer -- 12. Fees and
Expenses" in the Offer to Purchase is incorporated herein by reference.
(c) The answer to Item 4(a)-(b) of the Schedule 14D-1 is incorporated
herein by reference.
(d) Not applicable.
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
(a) The answer to Item 5 of the Schedule 14D-1 is incorporated herein by
reference.
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(b)-(c) The information set forth under "Special Factors -- Background of
the Transaction" and "-- Purpose of the Transaction" in the Offer to Purchase is
incorporated herein by reference.
(d) The information set forth under "Special Factors -- Certain Tax
Consequences" and "-- Certain Effects of the Transaction" in the Offer to
Purchase is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(b) The information set forth under "Special Factors -- Fairness of the
Transaction" and "-- Opinions and Reports of Financial Advisors" in the Offer to
Purchase is incorporated herein by reference.
(c)-(d) The information set forth under "Introduction" and "Special
Factors -- Fairness of the Transaction" in the Offer to Purchase is incorporated
herein by reference.
(e) The information set forth under "Introduction" and "Special
Factors -- Fairness of the Transaction" in the Offer to Purchase is incorporated
herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth under "Special Factors -- Background of
the Transaction", "-- Fairness of the Transaction", "-- Opinions and Reports of
Financial Advisors" and "-- Interests of Certain Persons in the Transaction" in
the Offer to Purchase is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The answer to Item 6 of the Schedule 14D-1 is incorporated herein
by reference. The information set forth under "The Tender Offer -- 6. Certain
Information Concerning the Company" in, and in Schedule I to, the Offer to
Purchase is also incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The answer to Item 7 of the Schedule 14D-1 is incorporated herein by
reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information set forth under " Introduction" and "Special
Factors -- Interests of Certain Persons in the Transaction" in the Offer to
Purchase is incorporated herein by reference.
(b) The information set forth under "Introduction", "Special
Factors -- Fairness of the Transaction" and "-- Opinions and Reports of
Financial Advisors" in the Offer to Purchase is incorporated herein by
reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in "Special Factors -- Dissenters Rights" in
the Offer to Purchase is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
The information set forth under "The Tender Offer -- 6. Certain Information
Concerning the Company" in, and in Annex C to, the Offer to Purchase is
incorporated herein by reference.
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ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth under "Special Factors -- Plans for the
Company After the Merger" in the Offer to Purchase is incorporated herein by
reference.
(b) The answer to Item 8 of the Schedule 14D-1 is incorporated herein by
reference.
ITEM 16. ADDITIONAL INFORMATION.
The answer to Item 10(f) of the Schedule 14D-1 is incorporated herein by
reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) -- Not applicable.
(b)(1) -- Report of Lazard Freres & Co. dated July 12, 1994.
(b)(2) -- Opinion of Lazard Freres & Co. dated July 12, 1994.
(b)(3) -- Opinion of Lazard Freres & Co. dated August 4, 1994.
(b)(4) -- Opinion of Allen & Company Incorporated dated August 4, 1994 (set forth as
Annex A to the Offer to Purchase).
(b)(5) -- Report of Allen & Company Incorporated dated August 4, 1994.
(c)(1) -- Joint Filing Agreement pursuant to Rule 13d-1(f), dated December 1, 1992
between Comcast Corporation and Liberty Media Corporation (Incorporated by
reference to Exhibit 1 to the Schedule 13D filed by Comcast Corporation and
Liberty Media Corporation, in respect of Common Stock of the Company, dated
December 2, 1992)
(c)(2) -- Participation Agreement, dated as of December 1, 1992 among Comcast
Corporation, Comcast Financial Corporation, Comcast Cable Communications,
Inc., Comcast Cablevision of Maryland Limited Partnership, Comcast Cable
Investors L.P., Comcast Cablevision of Indiana L.P., Liberty Media
Corporation and Liberty Program Investments, Inc. (Incorporated by reference
to Exhibit 2 to the Schedule 13D filed by Comcast Corporation and Liberty
Media Corporation, in respect of Common Stock of the Company, dated December
2, 1992)
(c)(3) -- Joint Filing Agreement pursuant to Rule 13d-1(f), dated December 15, 1992,
among Comcast Corporation, Liberty Media Corporation and Barry Diller
(Incorporated by reference to Exhibit 3 to Amendment No. 1 to the Schedule
13D filed by Comcast Corporation and Liberty Media Corporation and the
original Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated December 15, 1992)
(c)(4) -- Summary Term Sheet, dated December 9, 1992, agreed to in principle by
Comcast Corporation, Liberty Media Corporation and Barry Diller
(Incorporated by reference to Exhibit 7 to Amendment No. 1 to the Schedule
13D filed by Comcast Corporation and Liberty Media Corporation and the
original Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated December 15, 1992)
(c)(5) -- Stock Purchase Agreement, dated December 9, 1992, between Barry Diller and
Liberty Media Corporation (Incorporated by reference to Exhibit 8 to
Amendment No. 1 to the Schedule 13D filed by Comcast Corporation and Liberty
Media Corporation and the original Schedule 13D filed by Barry Diller, in
respect of Common Stock of the Company, dated December 15, 1992)
(c)(6) -- Letter, dated December 23, 1992, from William F. Costello, Executive Vice
President and Chief Financial Officer of the Company, to Peter R. Barton,
President of Liberty Program Investments, Inc. (Incorporated by reference to
Exhibit 9 to Amendment No. 2 to the Schedule 13D filed by Comcast
Corporation and Liberty Media Corporation and Amendment No. 1 to Schedule
13D filed by Barry Diller, in respect of Common Stock of the Company, dated
January 7, 1993)
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(c)(7) -- Letter, dated December 23, 1992, from William F. Costello, Executive Vice
President and Chief Financial Officer of the Company, to Peter R. Barton,
President of Liberty (Incorporated by reference to Exhibit 10 to Amendment
No. 2 to the Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 1 to Schedule 13D filed by Barry Diller, in
respect of Common Stock of the Company, dated January 7, 1993)
(c)(8) -- Letter, dated December 28, 1992, from Neal S. Grabell, Senior Vice President
and General Counsel of the Company, to Vivian Carr, Assistant Secretary of
Liberty (Incorporated by reference to Exhibit 11 to Amendment No. 2 to the
Schedule 13D filed by Comcast Corporation and Liberty Media Corporation and
Amendment No. 1 to Schedule 13D filed by Barry Diller, in respect of Common
Stock of the Company, dated January 7, 1993)
(c)(9) -- Letter, dated July 12, 1993, from Liberty Media Corporation to the Board of
Directors of the Company (Incorporated by reference to Exhibit 14 to
Amendment No. 3 to the Schedule 13D filed by Comcast Corporation and Liberty
Media Corporation and Amendment No. 2 to Schedule 13D filed by Barry Diller,
in respect of Common Stock of the Company, dated July 19, 1993)
(c)(10) -- Equity Compensation Agreement dated as of December 9, 1992 by and among the
Company, Diller and Arrow (Incorporated by reference to Exhibit 15 to
Amendment No. 3 to the Schedule 13D filed by Comcast Corporation and Liberty
Media Corporation and Amendment No. 2 to Schedule 13D filed by Barry Diller,
in respect of Common Stock of the Company, dated July 19, 1993)
(c)(11) -- Stockholders Agreement, dated July 16, 1993, among Liberty Media
Corporation, Comcast Corporation, Barry Diller and certain affiliates and
subsidiaries of such parties (Incorporated by reference to Exhibit 16 to
Amendment No. 3 to the Schedule 13D filed by Comcast Corporation and Liberty
Media Corporation and Amendment No. 2 to Schedule 13D filed by Barry Diller,
in respect of Common Stock of the Company, dated July 19, 1993)
(c)(12) -- Preliminary term sheet for Series E Cumulative Convertible Exchangeable
Preferred Stock (Incorporated by reference to Exhibit 19 to Amendment No. 4
to the Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 3 to Schedule 13D filed by Barry Diller, in
respect of Common Stock of the Company, dated September 21, 1993)
(c)(13) -- Letter agreement dated October 15, 1993, among QVC Network, Inc., Comcast
Corporation, Liberty Media Corporation, Advance Publications, Inc. and Cox
Enterprises, Inc. (Incorporated by reference to Exhibit 20 to Amendment No.
6 to the Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 5 to Schedule 13D filed by Barry Diller, in
respect of Common Stock of the Company, dated October 18, 1993)
(c)(14) -- Agreement dated October 15, 1993, among Comcast Corporation, Liberty Media
Corporation, Barry Diller, Advance Publications, Inc. and Cox Enterprises,
Inc. (Incorporated by reference to Exhibit 21 to Amendment No. 6 to the
Schedule 13D filed by Comcast Corporation and Liberty Media Corporation and
Amendment No. 5 to Schedule 13D filed by Barry Diller, in respect of Common
Stock of the Company, dated October 18, 1993)
(c)(15) -- Term Sheet for Convertible Exchangeable Preferred Stock of QVC Network, Inc.
(Incorporated by reference to Exhibit 22 to Amendment No. 6 to the Schedule
13D filed by Comcast Corporation and Liberty Media Corporation and Amendment
No. 5 to Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated October 18, 1993)
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(c)(16) -- Letter dated November 11, 1993, from QVC Network, Inc. to Comcast
Corporation, Advance Publications, Inc. and Cox Enterprises, Inc.
(Incorporated by reference to Exhibit 24 to Amendment No. 7 to the Schedule
13D filed by Comcast Corporation and Liberty Media Corporation and Amendment
No. 6 to Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated November 16, 1993)
(c)(17) -- Agreement dated November 11, 1993, between QVC Network, Inc. and Liberty
Media Corporation (Incorporated by reference to Exhibit 25 to Amendment No.
7 to the Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 6 to Schedule 13D filed by Barry Diller, in
respect of Common Stock of the Company, dated November 16, 1993)
(c)(18) -- Memorandum of Understanding dated November 11, 1993, between BellSouth
Corporation and QVC Network, Inc. (Incorporated by reference to Exhibit 26
to Amendment No. 7 to the Schedule 13D filed by Comcast Corporation and
Liberty Media Corporation and Amendment No. 6 to Schedule 13D filed by Barry
Diller, in respect of the Common Stock of the Company, dated November 16,
1993)
(c)(19) -- Understanding Among Stockholders dated November 11, 1993, among BellSouth
Corporation, Comcast Corporation, Liberty Media Corporation and Arrow
Investments, L.P. (Incorporated by reference to Exhibit 27 to Amendment No.
7 to the Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 6 to Schedule 13D filed by Barry Diller, in
respect of Common Stock of the Company, dated November 16, 1993)
(c)(20) -- Agreement Among Stockholders dated November 11, 1993, among BellSouth
Corporation, Comcast Corporation, Arrow Investments, L.P., Advance
Publications, Inc. and Cox Enterprises, Inc. (Incorporated by reference to
Exhibit 28 to Amendment No. 7 to the Schedule 13D filed by Comcast
Corporation and Liberty Media Corporation and Amendment No. 6 to Schedule
13D filed by Barry Diller, in respect of Common Stock of the Company, dated
November 16, 1993)
(c)(21) -- Agreement containing Consent Order dated November 11, 1993, among the Bureau
of Competition of the Federal Trade Commission, Tele-Communications, Inc.
and Liberty Media Corporation (Incorporated by reference to Exhibit 33 to
Amendment No. 7 to the Schedule 13D filed by Comcast Corporation and Liberty
Media Corporation and Amendment No. 6 to Schedule 13D filed by Barry Diller,
in respect of Common Stock of the Company, dated November 16, 1993)
(c)(22) -- Interim Agreement dated November 11, 1993, among the Federal Trade
Commission, Tele-Communications, Inc. and Liberty Media Corporation
(Incorporated by reference to Exhibit 34 to Amendment No. 7 to the Schedule
13D filed by Comcast Corporation and Liberty Media Corporation and Amendment
No. 6 to Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated November 16, 1993)
(c)(23) -- Voting Agreement dated December 22, 1993 by BellSouth Corporation, Comcast
Corporation, Cox Enterprises, Inc., Advance Publications, Inc., and Arrow
Investments, L.P. (Incorporated by reference to Exhibit 35 to Amendment No.
8 to the Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 7 to Schedule 13D filed by Barry Diller, in
respect of Common Stock of the Company, dated December 29, 1993)
(c)(24) -- Letter Agreement dated as of December 20, 1993 among QVC Network, Inc.,
Comcast Corporation, Cox Enterprises, Inc., Advance Publications, Inc., and
BellSouth Corporation (Incorporated by reference to Exhibit 36 to Amendment
No. 8 to the Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 7 to Schedule 13D filed by Barry Diller, in
respect of Common Stock of the Company, dated December 29, 1993)
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9
(c)(25) -- Letter Agreement dated as of February 1, 1994, among Comcast Corporation,
Cox Enterprises, Inc., Advance Publications, Inc., BellSouth Corporation and
QVC Network, Inc. (Incorporated by reference to Exhibit 37 to Amendment No.
9 to the Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 8 to Schedule 13D filed by Barry Diller, in
respect of Common Stock of the Company, dated February 3, 1994)
(c)(26) -- Stock Option Agreement dated as of February 15, 1994, among QVC Network,
Inc., BellSouth Corporation, Cox Enterprises, Inc. and Advance Publications,
Inc. (including exhibits) (Incorporated by reference to Exhibit 40 to
Amendment No. 11 to the Schedule 13D filed by Comcast Corporation and
Liberty Media Corporation and Amendment No. 10 to Schedule 13D filed by
Barry Diller, in respect of Common Stock of the Company, dated April 28,
1994)
(c)(27) -- Acknowledgement and Agreement dated as of February 15, 1994, by Comcast
Corporation and Liberty Media Corporation (Incorporated by reference to
Exhibit 41 to Amendment No. 11 to the Schedule 13D filed by Comcast
Corporation and Liberty Media Corporation and Amendment No. 10 to Schedule
13D filed by Barry Diller, in respect of Common Stock of the Company, dated
April 28, 1994)
(c)(28) -- Letter Agreement dated as of February 15, 1994, among Comcast Corporation,
BellSouth Corporation, Advance Publications, Inc., Arrow Investments, L.P.,
Cox Enterprises, Inc. and Liberty Media Corporation (Incorporated by
reference to Exhibit 42 to Amendment No. 11 to the Schedule 13D filed by
Comcast Corporation and Liberty Media Corporation and Amendment No. 10 to
Schedule 13D filed by Barry Diller, in respect of Common Stock of the
Company, dated April 28, 1994)
(c)(29) -- Letter Agreement dated as of February 15, 1994, among BellSouth Corporation,
Liberty Media Corporation, Comcast Corporation and Arrow Investments, L.P.
(Incorporated by reference to Exhibit 43 to Amendment No. 11 to the Schedule
13D filed by Comcast Corporation and Liberty Media Corporation and Amendment
No. 10 to Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated April 28, 1994)
(c)(30) -- Letter dated July 12, 1994 of Comcast Corporation to Barry Diller, Chairman
and Chief Executive Officer of QVC, Inc. (Included under "Special Factors --
Background of the Transaction" in Exhibit (d)(1) hereto)
(c)(31) -- Letter Agreement dated July 21, 1994 between Comcast Corporation and Liberty
Media Corporation (Incorporated by reference to Exhibit 46 to Amendment No.
20 to the Schedule 13D filed by Comcast Corporation , in respect of Common
Stock of the Company, dated July 22, 1994)
(c)(32) -- Agreement and Plan of Merger, dated as of August 4, 1994, among QVC, Inc.,
Comcast Corporation, Liberty Media Corporation and Comcast QMerger, Inc.*
(c)(33) -- Letter Agreement, dated as of August 4, 1994, among Comcast Corporation,
Liberty Media Corporation and Tele-Communications, Inc. (Incorporated by
reference to Exhibit 48 to Amendment No. 21 to Schedule 13D filed by Comcast
Corporation , in respect of Common Stock of the Company, dated August 8,
1994)
(c)(34) -- Letter Agreement, dated as of August 4, 1994, Comcast Corporation, Arrow
Investments, L.P. and Barry Diller (Incorporated by reference to Exhibit 50
to Amendment No. 21 to Schedule 13D filed by Comcast Corporation, in respect
of Common Stock of the Company, dated August 8, 1994)
(d)(1) -- Offer to Purchase, dated August 11, 1994*
(d)(2) -- Form of Letter of Transmittal (including Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9)*
(d)(3) -- Form of Notice of Guaranteed Delivery and Guarantee*
(d)(4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees*
(d)(5) -- Form of Letter to Clients from Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees*
7
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(d)(6) -- Text of press release issued by Comcast Corporation, Liberty Media
Corporation and QVC, Inc. dated August 4, 1994*
(d)(7) -- Form of summary advertisement dated August 11, 1994*
(d)(8) -- Accountants' consent relating to the inclusion of certain financial
statements of QVC, Inc. in Annex C to the Offer to Purchase.
(e) -- Section 262 of the Delaware General Corporation Law (set forth as Annex B to
the Offer to Purchase).
(f) -- Not applicable.
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* Incorporated by reference to the Schedule 14D-1.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: August 11, 1994
QVC, INC.
By: /s/ NEAL S. GRABELL
........................................
Name: Neal S. Grabell
Title: Senior Vice President,
General Counsel
and Corporate Secretary
QVC PROGRAMMING HOLDINGS, INC.
By: /s/ JULIAN A. BRODSKY
........................................
Name: Julian A. Brodsky
Title: Vice Chairman
COMCAST CORPORATION
By: /s/ JULIAN A. BRODSKY
........................................
Name: Julian A. Brodsky
Title: Vice Chairman
TELE-COMMUNICATIONS, INC.
By: /s/ STEPHEN M. BRETT
........................................
Name: Stephen M. Brett
Title: Executive Vice President
9
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EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ------------------------------------------------------------------- ------------
(a) -- Not applicable.
(b)(1) -- Report of Lazard Freres & Co. dated July 12, 1994..................
(b)(2) -- Opinion of Lazard Freres & Co. dated July 12, 1994.................
(b)(3) -- Opinion of Lazard Freres & Co. dated August 4, 1994................
(b)(4) -- Opinion of Allen & Company Incorporated dated August 4, 1994 (set
forth as Annex A to the Offer to Purchase) ........................
(b)(5) -- Report of Allen & Company Incorporated dated August 4, 1994 .......
(c)(1) -- Joint Filing Agreement pursuant to Rule 13d-1(f), dated December 1,
1992 between Comcast Corporation and Liberty Media Corporation
(Incorporated by reference to Exhibit 1 to the Schedule 13D filed
by Comcast Corporation and Liberty Media Corporation, in respect of
Common Stock of the Company, dated December 2, 1992)...............
(c)(2) -- Participation Agreement, dated as of December 1, 1992 among Comcast
Corporation, Comcast Financial Corporation, Comcast Cable
Communications, Inc., Comcast Cablevision of Maryland Limited
Partnership, Comcast Cable Investors L.P., Comcast Cablevision of
Indiana L.P., Liberty Media Corporation and Liberty Program
Investments, Inc. (Incorporated by reference to Exhibit 2 to the
Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation, in respect of Common Stock of the Company, dated
December 2, 1992)..................................................
(c)(3) -- Joint Filing Agreement pursuant to Rule 13d-1(f), dated December
15, 1992, among Comcast Corporation, Liberty Media Corporation and
Barry Diller (Incorporated by reference to Exhibit 3 to Amendment
No. 1 to the Schedule 13D filed by Comcast Corporation and Liberty
Media Corporation and the original Schedule 13D filed by Barry
Diller, in respect of Common Stock of the Company, dated December
15, 1992)..........................................................
(c)(4) -- Summary Term Sheet, dated December 9, 1992, agreed to in principle
by Comcast Corporation, Liberty Media Corporation and Barry Diller
(Incorporated by reference to Exhibit 7 to Amendment No. 1 to the
Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and the original Schedule 13D filed by Barry Diller, in
respect of Common Stock of the Company, dated December 15, 1992)...
(c)(5) -- Stock Purchase Agreement, dated December 9, 1992, between Barry
Diller and Liberty Media Corporation (Incorporated by reference to
Exhibit 8 to Amendment No. 1 to the Schedule 13D filed by Comcast
Corporation and Liberty Media Corporation and the original Schedule
13D filed by Barry Diller, in respect of Common Stock of the
Company, dated December 15, 1992)..................................
13
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
(c)(6) -- Letter, dated December 23, 1992, from William F. Costello,
Executive Vice President and Chief Financial Officer of the
Company, to Peter R. Barton, President of Liberty Program
Investments, Inc. (Incorporated by reference to Exhibit 9 to
Amendment No. 2 to the Schedule 13D filed by Comcast Corporation
and Liberty Media Corporation and Amendment No. 1 to Schedule 13D
filed by Barry Diller, in respect of Common Stock of the Company,
dated January 7, 1993).............................................
(c)(7) -- Letter, dated December 23, 1992, from William F. Costello,
Executive Vice President and Chief Financial Officer of the
Company, to Peter R. Barton, President of Liberty (Incorporated by
reference to Exhibit 10 to Amendment No. 2 to the Schedule 13D
filed by Comcast Corporation and Liberty Media Corporation and
Amendment No. 1 to Schedule 13D filed by Barry Diller, in respect
of Common Stock of the Company, dated January 7, 1993).............
(c)(8) -- Letter, dated December 28, 1992, from Neal S. Grabell, Senior Vice
President and General Counsel of the Company, to Vivian Carr,
Assistant Secretary of Liberty (Incorporated by reference to
Exhibit 11 to Amendment No. 2 to the Schedule 13D filed by Comcast
Corporation and Liberty Media Corporation and Amendment No. 1 to
Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated January 7, 1993)................................
(c)(9) -- Letter, dated July 12, 1993, from Liberty Media Corporation to the
Board of Directors of the Company (Incorporated by reference to
Exhibit 14 to Amendment No. 3 to the Schedule 13D filed by Comcast
Corporation and Liberty Media Corporation and Amendment No. 2 to
Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated July 19, 1993)..................................
(c)(10) -- Equity Compensation Agreement dated as of December 9, 1992 by and
among the Company, Diller and Arrow (Incorporated by reference to
Exhibit 15 to Amendment No. 3 to the Schedule 13D filed by Comcast
Corporation and Liberty Media Corporation and Amendment No. 2 to
Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated July 19, 1993)..................................
(c)(11) -- Stockholders Agreement, dated July 16, 1993, among Liberty,
Comcast, Barry Diller and certain affiliates and subsidiaries of
such parties (Incorporated by reference to Exhibit 16 to Amendment
No. 3 to the Schedule 13D filed by Comcast Corporation and Liberty
Media Corporation and Amendment No. 2 to Schedule 13D filed by
Barry Diller, in respect of Common Stock of the Company, dated July
19, 1993)..........................................................
(c)(12) -- Preliminary term sheet for Series E Cumulative Convertible
Exchangeable Preferred Stock (Incorporated by reference to Exhibit
19 to Amendment No. 4 to the Schedule 13D filed by Comcast
Corporation and Liberty Media Corporation and Amendment No. 3 to
Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated September 21, 1993).............................
(c)(13) -- Letter agreement dated October 15, 1993, among QVC Network, Inc.,
Comcast Corporation, Liberty Media Corporation, Advance
Publications, Inc. and Cox Enterprises, Inc. (Incorporated by
reference to Exhibit 20 to Amendment No. 6 to the Schedule 13D
filed by Comcast Corporation and Liberty Media Corporation and
Amendment No. 5 to Schedule 13D filed by Barry Diller, in respect
of Common Stock of the Company, dated October 18, 1993)............
14
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
(c)(14) -- Agreement dated October 15, 1993, among Comcast Corporation,
Liberty Media Corporation, Barry Diller, Advance Publications, Inc.
and Cox Enterprises, Inc. (Incorporated by reference to Exhibit 21
to Amendment No. 6 to the Schedule 13D filed by Comcast Corporation
and Liberty Media Corporation and Amendment No. 5 to Schedule 13D
filed by Barry Diller, in respect of Common Stock of the Company,
dated October 18, 1993)............................................
(c)(15) -- Term Sheet for Convertible Exchangeable Preferred Stock of QVC
Network, Inc. (Incorporated by reference to Exhibit 22 to Amendment
No. 6 to the Schedule 13D filed by Comcast Corporation and Liberty
Media Corporation and Amendment No. 5 to Schedule 13D filed by
Barry Diller, in respect of Common Stock of the Company, dated
October 18, 1993)..................................................
(c)(16) -- Letter dated November 11, 1993, from QVC Network, Inc. to Comcast
Corporation, Advance Publications, Inc. and Cox Enterprises, Inc.
(Incorporated by reference to Exhibit 24 to Amendment No. 7 to the
Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 6 to Schedule 13D filed by Barry
Diller, in respect of Common Stock of the Company, dated November
16, 1993)..........................................................
(c)(17) -- Agreement dated November 11, 1993, between QVC Network, Inc. and
Liberty Media Corporation (Incorporated by reference to Exhibit 25
to Amendment No. 7 to the Schedule 13D filed by Comcast Corporation
and Liberty Media Corporation and Amendment No. 6 to Schedule 13D
filed by Barry Diller, in respect of Common Stock of the Company,
dated November 16, 1993)...........................................
(c)(18) -- Memorandum of Understanding dated November 11, 1993, between
BellSouth Corporation and QVC Network, Inc. (Incorporated by
reference to Exhibit 26 to Amendment No. 7 to the Schedule 13D
filed by Comcast Corporation and Liberty Media Corporation and
Amendment No. 6 to Schedule 13D filed by Barry Diller, in respect
of Common Stock of the Company, dated November 16, 1993)...........
(c)(19) -- Understanding Among Stockholders dated November 11, 1993, among
BellSouth Corporation, Comcast Corporation, Liberty Media
Corporation and Arrow Investments, L.P. (Incorporated by reference
to Exhibit 27 to Amendment No. 7 to the Schedule 13D filed by
Comcast Corporation and Liberty Media Corporation and Amendment No.
6 to Schedule 13D filed by Barry Diller, in respect of Common Stock
of the Company, dated November 16, 1993)...........................
(c)(20) -- Agreement Among Stockholders dated November 11, 1993, among
BellSouth Corporation, Comcast Corporation, Arrow Investments,
L.P., Advance Publications, Inc. and Cox Enterprises, Inc.
(Incorporated by reference to Exhibit 28 to Amendment No. 7 to the
Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 6 to Schedule 13D filed by Barry
Diller, in respect of Common Stock of the Company, dated November
16, 1993)..........................................................
15
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- -----------
(c)(21) -- Agreement containing Consent Order dated November 11, 1993, among
the Bureau of Competition of the Federal Trade Commission,
Tele-Communications, Inc. and Liberty Media Corporation
(Incorporated by reference to Exhibit 33 to Amendment No. 7 to the
Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 6 to Schedule 13D filed by Barry
Diller, in respect of Common Stock of the Company, dated November
16, 1993)..........................................................
(c)(22) -- Interim Agreement dated November 11, 1993, among the Federal Trade
Commission, Tele-Communications, Inc. and Liberty Media Corporation
(Incorporated by reference to Exhibit 34 to Amendment No. 7 to the
Schedule 13D filed by Comcast Corporation and Liberty Media
Corporation and Amendment No. 6 to Schedule 13D filed by Barry
Diller, in respect of Common Stock of the Company, dated November
16, 1993)..........................................................
(c)(23) -- Voting Agreement dated December 22, 1993 by BellSouth Corporation,
Comcast Corporation, Cox Enterprises, Inc., Advance Publications,
Inc., and Arrow Investments, L.P. (Incorporated by reference to
Exhibit 35 to Amendment No. 8 to the Schedule 13D filed by Comcast
Corporation and Liberty Media Corporation and Amendment No. 7 to
Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated December 29, 1993)..............................
(c)(24) -- Letter Agreement dated as of December 20, 1993 among QVC Network,
Inc., Comcast Corporation, Cox Enterprises, Inc., Advance
Publications, Inc., and BellSouth Corporation (Incorporated by
reference to Exhibit 36 to Amendment No. 8 to the Schedule 13D
filed by Comcast Corporation and Liberty Media Corporation and
Amendment No. 7 to Schedule 13D filed by Barry Diller, in respect
of Common Stock of the Company, dated December 29, 1993)...........
(c)(25) -- Letter Agreement dated as of February 1, 1994, among Comcast
Corporation, Cox Enterprises, Inc., Advance Publications, Inc.,
BellSouth Corporation and QVC Network, Inc. (Incorporated by
reference to Exhibit 37 to Amendment No. 9 to the Schedule 13D
filed by Comcast Corporation and Liberty Media Corporation and
Amendment No. 8 to Schedule 13D filed by Barry Diller, in respect
of Common Stock of the Company, dated February 3, 1994)............
(c)(26) -- Stock Option Agreement dated as of February 15, 1994, among QVC
Network, Inc., BellSouth Corporation, Cox Enterprises, Inc. and
Advance
Publications, Inc. (including exhibits) (Incorporated by reference
to
Exhibit 40 to Amendment No. 11 to the Schedule 13D filed by Comcast
Corporation and Liberty Media Corporation and Amendment No. 10 to
Schedule 13D filed by Barry Diller, in respect of Common Stock of
the Company, dated April 28, 1994).................................
(c)(27) -- Acknowledgement and Agreement dated as of February 15, 1994, by
Comcast Corporation and Liberty Media Corporation (Incorporated by
reference to Exhibit 41 to Amendment No. 11 to the Schedule 13D
filed by Comcast Corporation and Liberty Media Corporation and
Amendment No. 10 to Schedule 13D filed by Barry Diller, in respect
of Common Stock of the Company, dated April 28, 1994)..............
16
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
(c)(28) -- Letter Agreement dated as of February 15, 1994, among Comcast
Corporation, BellSouth Corporation, Advance Publications, Inc.,
Arrow Investments, L.P., Cox Enterprises, Inc. and Liberty Media
Corporation (Incorporated by reference to Exhibit 42 to Amendment
No. 11 to the Schedule 13D filed by Comcast Corporation and Liberty
Media Corporation and Amendment No. 10 to Schedule 13D filed by
Barry Diller, in respect of Common Stock of the Company, dated
April 28, 1994)....................................................
(c)(29) -- Letter Agreement dated as of February 15, 1994, among BellSouth
Corporation, Liberty Media Corporation, Comcast Corporation and
Arrow Investments, L.P. (Incorporated by reference to Exhibit 43 to
Amendment No. 11 to the Schedule 13D filed by Comcast Corporation
and Liberty Media Corporation and Amendment No. 10 to Schedule 13D
filed by Barry Diller, in respect of Common Stock of the Company,
dated April 28, 1994)..............................................
(c)(30) -- Letter dated July 12, 1994 of Comcast Corporation to Barry Diller,
Chairman and Chief Executive Officer of QVC, Inc. (Included under
"Special Factors -- Background of the Transaction" in Exhibit
(d)(1) hereto).....................................................
(c)(31) -- Letter Agreement dated July 21, 1994 between Comcast Corporation
and Liberty Media Corporation (Incorporated by reference to Exhibit
46 to Amendment No. 20 to the Schedule 13D filed by Comcast
Corporation, in respect of the Company, dated July 22, 1994).......
(c)(32) -- Agreement and Plan of Merger, dated as of August 4, 1994, among
QVC, Inc., Comcast Corporation, Liberty Media Corporation and
Comcast QMerger, Inc.*.............................................
(c)(33) -- Letter Agreement, dated as of August 4, 1994, among Comcast
Corporation, Liberty Media Corporation and Tele-Communications,
Inc. (Incorporated by reference to Exhibit 48 to Amendment No. 21
to Schedule 13D filed by Comcast, in respect of Common Stock of the
Company, dated August 8, 1994).....................................
(c)(34) -- Letter Agreement, dated as of August 4, 1994, among Comcast
Corporation, Arrow Investments, L.P. and Barry Diller (Incorporated
by reference to Exhibit 50 to Amendment No. 21 to Schedule 13D
filed by Comcast Corporation, in respect of Common Stock of the
Company, dated August 8, 1994).....................................
(d)(1) -- Offer to Purchase, dated August 11, 1994*..........................
(d)(2) -- Form of Letter of Transmittal (including Guidelines for
Certification of Taxpayer Identification Number on Substitute Form
W-9)*..............................................................
(d)(3) -- Form of Notice of Guaranteed Delivery and Guarantee*...............
(d)(4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees*......................................
(d)(5) -- Form of Letter to Clients from Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees*................................
(d)(6) -- Text of press release issued by Comcast Corporation, Liberty Media
Corporation and the Company dated August 4, 1994*..................
(d)(7) -- Form of summary advertisement dated August 11, 1994*...............
17
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ------------------------------------------------------------------- ------------
(d)(8) -- Accountants' consent relating to the inclusion of certain financial
statements of QVC, Inc. in Annex C to the Offer to Purchase........
(e) -- Section 262 of the Delaware General Corporation Law (set forth as
Annex B to the Offer to Purchase)..................................
(f) -- Not applicable.
- ---------------
* Incorporated by reference to the 14D-1.
1
EXHIBIT(b)(1)
- -------------------------------------------------------------------------------
PROJECT QUICK
- --------------------------------------------------------------------------------
PRESENTATION TO THE BOARD OF DIRECTORS
JULY 12, 1994
Lazard Freres & Co.
2
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Tab Page
--- ----
I. EXECUTIVE SUMMARY............................................ 1
II. TRANSACTION STRUCTURE
A. CONSIDERATION........................................ 2
B. SOURCES AND USES..................................... 3
C. CASH/DEBT BALANCES................................... 4
III. ANALYSIS OF CBS DEAL
A. OVERVIEW.............................................. 5
B. BLENDED MULTIPLE ANALYSIS............................. 6
C. STOCK TRADING HISTORY................................. 7
IV. VALUATION OF QVC
A. OPERATIONAL OVERVIEW.................................. 8
B. SUMMARY VALUATION RESULTS............................. 9
C. PROJECTIONS........................................... 10
D. ANALYSIS AT VARIOUS PRICES............................ 15
E. STOCK TRADING HISTORY................................. 16
F. COMPARABLE COMPANIES SUMMARY.......................... 18
V. SUMMARY OF RECENT RESEARCH REPORTS....................... 19
3
- --------------------------------------------------------------------------------
I. Executive Summary
- --------------------------------------------------------------------------------
Comcast is planning to propose to acquire all shares of QVC which Comcast does
not already own for a consideration of $45.00 per share consisting of $38.00
per share in cash and $7.00 per share in a newly formed class of Comcast
Convertible Exchangeable Preferred Stock. This Preferred would have a 7.5%
annual dividend and would be convertible into Class A Special Common Stock at a
conversion price of $21.00 per share.
QVC's stock price as of 1:15 p.m. today was $35.125. The $45.00 price
represents a 28% premium to this price (and a 39% premium to QVC's stock price
the day prior to the announcement of the CBS deal).
The total amount of funds required to complete the QVC transaction is
approximately $1.9 billion, of which $274 million would be Convertible
Preferred.
The board meetings for both QVC and CBS to approve their proposed merger are
scheduled for Wednesday, July 13. Comcast's acquisition proposal would be
delivered and publicly disclosed after the close of business today, subject to
the approval of the Comcast board of directors.
-1- Lazard Freres & Co.
4
- --------------------------------------------------------------------------------
II. Transaction Structure
- --------------------------------------------------------------------------------
Consideration
-------------
Consideration Summary:
- ---------------------- Per Share Aggregate %
--------- --------- --------
Cash $38.00 $1,489 84.4%
Convertible Preferred 7.00 274 15.6%
------- ------- --------
Total $45.00 $1,764 100.0%
------- ------- --------
Shares purchased:
- -----------------
Public 23.873
Liberty 10.256
Time Warner 4.062
Barry Diller 1.000
-------
Total (1) 39.191
-------
- -------------------
(1) Assumes 8.027 MM options are cancelled for cash on a net basis.
Note: Total transaction value including Comcast's 8.628 MM shares is
approximately $2.2 billion.
Lazard Freres & Co.
-2-
5
- --------------------------------------------------------------------------------
II. Transaction Structure (cont'd)
- --------------------------------------------------------------------------------
Sources/Uses
------------
Sources: Uses:
- -------- -----
From QVC: Total Cash:
New QVC Bank Debt $ 950 $38.00 of Cash per QVC share $ 1,489
New QVC Senior Subordinated Debt 200 Cancellation of options 90
------ Fees and expenses 46
--------
Total QVC Sources: 1,150
Total Cash Uses:
1,625
From Comcast:
New Comcast Borrowing/Cash 475
Convertible Preferred (1) 274 $7.00 of Convertible Preferred per QVC share 274
--- ---
Total Comcast Sources: 750
---
Total Sources: $ 1,900 Total Uses: $ 1,900
------- -------
- ------------------------
(1) Issuable shares: 13.1 million at $21.00 per Share.
-3- Lazard Freres & Co.
6
- --------------------------------------------------------------------------------
II. Transaction Structure (cont'd)
- --------------------------------------------------------------------------------
Cash/Debt Balances
------------------
Estimated 12/31/94 Value of
----------------------------- 1994 Operating Net Debt/ Investment
Cash Debt Net Debt Cash Flow OCF Portfolio
---- ---- -------- -------------- --------- ----------
Comcast Standalone $ 434 $4,234 $3,800 $600 6.33x $1,736
Maclean Hunter (500) 800 1,300 120 - -
Heritage Stake 275 - (275) - - (275)
----- ------ ------ ---- ---- ------
Pro Forma Before QVC 209 5,034 4,825 720 6.70x 1,461
QVC (475) 1,150 1,625 193 - (281)
----- ------ ------ ---- ---- ------
Pro Forma with QVC $(266) $6,184 $6,450 $913 7.07x $1,180
----- ------ ------ ---- ---- ------
====================================================================================================================================
Potential Sources for $475 Shortfall:
- ------------------------------------
- Partners for Maclean Hunter
- Partners for QVC
- Asset Sales:
- Nextel
- Cable Assets
- Potential Tax Free Deal with Liberty and/or Time Warner
-4- Lazard Freres & Co.
7
- -------------------------------------------------------------------------------
III. Analysis of CBS Deal
- -------------------------------------------------------------------------------
Overview
--------
- - On July 30, CBS and QVC announced they were close to a merger.
- - CBS/QVC merger details:
Per Share Consideration to CBS and QVC Based on Current
CBS Share Price of $300.00
-------------------------------------------------------------
Implied Trading Level of CBS (Newco): $311.80
-----------
CBS Shareholders Receive
------------------------
Cash Dividend ($175.00) $175.00
Shares of Newco Common (0.4009) 125.00
-----------
Total $300.00
-----------
QVC Shareholders Receive
------------------------
Shares of Newco Conv. Pref. (0.1931) $23.05
Shares of Newco Common (0.0486) 15.15
-----------
Total $38.20
-----------
- - Current Stock prices at 7/11/94:
CBS $302.00
QVC $35.75
- - Newco Convertible Preferred Terms:
- Face Value $100.00
- Coupon 4.0%
- Conversion Price $309.69
- Number of Newco Common
Each Pref. Convertible Into 0.3229
- 10-Year Non-Callable
- Exchangeable into Convertible Debt After 5 Years
- - The stock price of QVC has declined 8% to $35.125, after peaking at $38.00
the date CBS/QVC deal was announced.
-5- Lazard Freres & Co.
8
- --------------------------------------------------------------------------------
III. Analysis of CBS Deal (cont'd)
- --------------------------------------------------------------------------------
Blended Multiple Analysis
-------------------------
Comparable Multiple Values: Pre-Merger Multiples Comp. Co. Multiples
-------------------- -------------------
CBS QVC Cap Cities News Corp.
---------- ----------- ------------ ----------
1994 EBITDA Multiple 7.0x 7.9x 9.2x 12.1x
Implied Deal Value per CBS Shares $ 266 $ 287 317 384
Implied Deal Value per QVC Shares 31 35 42 52
Blended Multiple Analysis:
CBS Multiple
---------------------------------------------------
7.0x 7.5x 8.0x 8.5x 9.0x
7.0x 7.0x 7.4x 7.7x 8.1x 8.5x
7.5x 7.1 7.5 7.9 8.2 8.6
QVC Multiple 8.0x 7.3 7.6 8.0 8.4 8.7
------------ 8.5x 7.4 7.8 8.1 8.5 8.9
9.0x 7.5 7.9 8.3 8.6 9.0
Implied Deal Value per Existing CBS Share:
CBS Multiple
---------------------------------------------------
7.0x 7.5x 8.0x 8.5x 9.0x
7.0x $266 $275 $283 $292 $300
7.5x 270 278 286 295 303
QVC Multiple 8.0x 273 281 290 298 306
------------ 8.5x 276 284 293 301 310
9.0x 279 287 296 304 313
Implied Deal Value per Existing QVC Share:
CBS Multiple
--------------------------------------------------
7.0x 7.5x 8.0x 8.5x 9.0x
7.0x $31 $33 $35 $37 $38
7.5x 32 34 35 37 39
QVC Multiple 8.0x 32 34 36 38 40
------------ 8.5x 33 35 37 38 40
9.0x 34 36 37 39 41
- ------------------------------
1994E EBITDA ($MM)(1)
CBS $ 528 73.2%
QVC $ 193 26.8%
----------
Newco before Synergies $ 721 100.0%
Synergies (2) 3
----------
Newco after Synergies $ 724
----------
(1) Source: DLJ and Oppenheimer for CBS and QVC, respectively.
(2) Source: Synergies derived from Wachtell.
-6- Lazard Freres & Co.
9
- --------------------------------------------------------------------------------
III. Analysis of CBS Deal(cont'd)
- --------------------------------------------------------------------------------
Stock Trading History
---------------------
QVC and CBS
From 6/28/94 to 7/11/94
2 Week Perspective
Chart III describes the Stock trading history of QVC and CBS from 6/28/94
through 7/11/94. The chart shows that the per Share stock price of QVC ranged
from $32.75 on 6/29/94 and $38.00 on 6/30/94, and that the Share price of CBS
ranged from $259.00 on 6/28/94 and $313.00 on 6/30/94, as follows:
QVC CBS
Price Per Price Per
Date Share Share
- ---- --------- ---------
6/28/94 $32.750 $259.000
6/29/94 32.375 263.000
6/30/94 38.000 313.000
7/01/94 37.750 307.000
7/05/94 36.000 310.000
7/06/94 36.000 310.250
7/07/94 37.000 308.500
7/08/94 36.250 303.875
7/11/94 35.750 302.000
-7- Lazard Freres & Co.
10
- --------------------------------------------------------------------------------
IV. Valuation of QVC
- --------------------------------------------------------------------------------
OPERATION OVERVIEW
------------------
- - Largest television shopping retailer in the world, operating 24 hours per
day.
- - Launched in 1986, had 1993 revenues of $1.2 billion.
- - Reaches 50 million homes in the U.S., representing 80% of all cable
television subscribers.
- - In addition to the "Primary Channel", new ventures include:
LAUNCHED IN 1993
-- JV with BSkyB for a U.K. shopping channel.
-- JV with Grupo Televisa for a shopping channel in Mexico.
TO BE LAUNCHED IN 1994
-- Q2 - a more upscale shopping channel broadcasting on weekends.
-- onQ - a fashion-oriented shopping channel broadcasting on weekdays and
geared toward a younger audience.
TO BE LAUNCHED IN 1994
-- Q-online a computer on-line shopping service.
- - SUMMARY FINANCIAL DATA ($MM):
FISCAL YEAR 1989 1990 1991 1992 1993 1994E
----- ---- ----- ----- ----- -----
Revenues 453 776 922 1,071 1,222 1,386
Growth 134.6% 71.2% 18.8% 16.1% 14.2% 13.4%
EBITDA 39 76 131 165 195 193
Margin 8.5% 9.8% 14.2% 15.4% 16.0% 13.9%
Growth 160.8% 96.1% 73.2% 25.6% 18.4% (1.0%)
Lazard Freres & Co.
-8-
11
- --------------------------------------------------------------------------------
IV. Valuation of QVC (cont'd)
- --------------------------------------------------------------------------------
Summary Valuation Results
8.0x EBITDA 9.0x EBITDA
Unlevered DCF Values per Share: Exit Multiple Exit Multiple
------------------ ------------------
Discount Rate: 14.0% 15.0% 14.0% 15.0%
------- ------- ------- -------
Revenue Growth:
10.0% $ 38.60 $ 37.09 $ 42.25 $ 40.58
12.5% 47.54 45.66 52.07 50.02
15.0% 57.07 54.82 62.63 60.14
Equity IRR(1): Leveraged Pre-Tax IRR
--------------------------------------------
Purchase Price per Share
--------------------------------------------
$ 40.00 $ 45.00 $ 50.00 $ 55.00
------- ------- ------- -------
EBITDA Exit Multiple 8.0x 27.8% 20.8% 15.7% 11.6%
9.0 31.5% 24.3% 19.0% 14.9%
10.0 34.8% 27.5% 22.0% 17.8%
11.0 37.8% 30.3% 24.8% 20.4%
- ---------------
(1) Assumes $1.1 billion equity investment including the value of QVC shares
already owned by Comcast.
Lazard Freres & Co.
9
12
- --------------------------------------------------------------------------------
IV. Valuation of QVC (cont'd)
- --------------------------------------------------------------------------------
Projections
Summary Projection Assumptions(1)
1994 1999 CAGR
------ ------ -----
- - Revenue
QVC Homes as % of Cable Television Subscribers 80.3% 80.3% 0.0%
QVC Customers as % of QVC "Homes" 8.4% 9.8% 3.3%
Avg. Annual Revenue per Customer $362 $485 6.0%
- - Expense
Gross Margin 40.0% 40.0%
Variable Cost as % of Revenue 14.2% 14.0%
General and Administrative -- Increase of $20MM in 1994 for
additional overhead related to
launching of Q2/onQ channels and
staffing for international joint
ventures. Thereafter, G&A increases
$15MM annually.
- - Credit Card Income -- 0.6% of revenue based on actual
prior experience.
- - Capital Expenditures -- 2% of revenue based on actual prior
experience.
- - Other
Taxes -- Tax rate = 42%; however deferred
until 1997. Assumes $80MM of inside
basis.
Q2 Launch -- $30MM in carriage fees spent in each
of the years 1995 and 1996.
Joint Ventures -- Valued at cost of $50MM in 1999.
Affiliation Agreements -- Assumes existing MSO's continue
carriage.
- ------------------------------------
(1) Assumptions prepared by Comcast management based upon publicly available
information.
Lazard Freres & Co.
10
13
- --------------------------------------------------------------------------------
IV. Valuation of QVC (cont'd)
- --------------------------------------------------------------------------------
Projections (cont'd)
-----------
Executive Summary
(Amounts in Millions)
Preliminary
Actual Projection
------------------------- Estimated ----------------
1991 1992 1993 1994 1995 1996
----- ------ ------ --------- ------ ------
Revenue $ 922 $1,071 $1,222 $1,386 $1,565 $1,762
COGS 535 622 723 832 939 1,057
----- ------ ------ --------- ------ ------
Gross Margin 387 449 499 555 626 705
Variable 145 160 171 197 219 247
G&A 111 124 133 165 180 195
----- ------ ------ --------- ------ ------
Operating Cash Flow $ 131 $ 165 $ 195 $ 193 $ 227 $ 263
Net credit card income 3 6 7 8 9 10
----- ------ ------ --------- ------ ------
Adjusted Operating Cash Flow $ 134 $ 170 $ 202 $ 201 $ 236 $ 273
===== ====== ====== ======= ====== ======
Gross Margin 42.0% 41.9% 40.8% 40.0% 40.0% 40.0%
Operating Cash Flow Margin 14.3% 15.4% 16.0% 13.9% 14.5% 14.9%
Operating Cash Flow Growth 25.3% 18.4% -1.2% 17.8% 15.9%
Capital Expenditures $21 $25 $28 $31 $35
Preliminary Projection Annual Growth
-------------------------- -----------------------
1997 1998 1999 91-93 93-94 94-99
------ ------ ------ ----- ----- -----
Revenue $1,978 $2,215 $2,478 15.1% 13.4% 12.3%
COGS 1,187 1,329 1,487 16.3% 15.0% 12.3%
------ ------ ------ ----- ----- -----
Gross Margin 791 886 991 13.5% 11.2% 12.3%
Variable 277 310 347 8.5% 15.0% 12.0%
G&A 210 225 240 9.5% 24.3% 7.8%
------ ------ ------ ----- ----- -----
Operating Cash Flow $ 304 $ 351 $ 404 21.8% -1.2% 16.0%
Net credit card income 11 13 14 55.4% 13.4% 12.3%
------ ------ ------ ----- ----- -----
Adjusted Operating Cash Flow $ 316 $ 364 $ 418 22.6% -0.7% 15.8%
====== ====== ====== ===== ====== =====
Gross Margin 40.0% 40.0% 40.0%
Operating Cash Flow Margin 15.4% 15.8% 16.3%
Operating Cash Flow Growth 15.7% 15.4% 15.2%
Capital Expenditures $40 $44 $50
11 Lazard Freres & Co.
14
-------------------------------------------------------------------------------
IV. Valuation of QVC (cont'd)
- --------------------------------------------------------------------------------
PROJECTIONS (cont'd)
--------------------
Cash Flow Summary
(Amounts in Millions)
Operations:
Operating Cash Flow
Capital Expenditures
Working Capital 2 Months
Losses from Joint Ventures
Fund Q2 Launch
Tax Liability (Deferred until 1997)
Free Cash Flow
Financing:
Bank Debt Inc (Dec) 4.4 x Run-rate Adj. OCF 8.50% 950
Senior Subordinated Notes 0.9 x Run-rate Adj. OCF 11.25% 200
Interest Expense
Equity 1,148
Purchase Price: X Run-rate Adj. OCF 10.3 $45.00 (2,242)
Transaction Fees (46)
-------
Ending Working Capital $ 10
=======
Capitalization:
Bank Debt $ 950
Senior Subordinated Notes 200
-------
Total Debt 1,150
Equity 1,148
-------
Total Capitalization $ 2,298
=======
Bank Debt to Operating Cash Flow 4.9
Total Debt to Operating Cash Flow 6.0
Interest Coverage (OCF/Int Exp)
Debt Service Coverage (OCF/Int+Debt Serv)
Annual Bank Debt Amortization
Cumulative Bank Debt Amortization
Preliminary Projection
------------------------------------------
1995 1996 1997 1998 1999 Total
------ ------ ------ ------ ------ -------
Operations:
Operating Cash Flow $ 236 $ 273 $ 316 $ 364 $ 418 $ 1,607
Capital Expenditures (31) (35) (40) (44) (50) (200)
Working Capital (6) (6) (7) (8) (9) (35)
Losses from Joint Ventures (15) (5) (20)
Fund Q2 Launch (30) (30) (60)
Tax Liability (Deferred until 1997) (177) (106) (131) (415)
------ ------ ------ ------ ------ -------
Free Cash Flow 154 197 92 205 228 877
Financing:
Bank Debt Inc (Dec) (50) (105) 0 (120) (155) 520
Senior Subordinated Notes 200
Interest Expense (101) (95) (90) (85) (73) (444)
Equity 1,148
Purchase Price: X Run-rate Adj. OCF (2,242)
Transaction Fees (46)
------ ------ ------ ------ ------ -------
Ending Working Capital $ 13 $ 10 $ 12 $ 12 $ 13 $ 13
====== ====== ====== ====== ====== =======
Capitalization:
Bank Debt $ 900 $ 795 $ 795 $ 675 $ 520
Senior Subordinated Notes 200 200 200 200 200
------ ------ ------ ------ ------
Total Debt 1,100 995 995 875 720
Equity 1,148 1,148 1,148 1,148 1,148
------ ------ ------ ------ ------
Total Capitalization $2,248 $2,143 $2,143 $2,023 $1,868
====== ====== ====== ====== ======
Bank Debt to Operating Cash Flow 3.8 2.9 2.5 1.9 1.2
Total Debt to Operating Cash Flow 4.8 3.8 3.3 2.5 1.8
Interest Coverage (OCF/Int Exp) 2.3 2.9 3.5 4.3 n/m
Debt Service Coverage (OCF/Int+Debt Serv) 1.6 1.4 3.5 1.8 1.8
Annual Bank Debt Amortization 5.3% 11.1% 0.0% 12.6% 16.3%
Cumulative Bank Debt Amortization 5.3% 16.3% 16.3% 28.9% 45.3%
12 Lazard Freres & Co.
15
- --------------------------------------------------------------------------------
IV. Valuation of QVC (cont'd)
- --------------------------------------------------------------------------------
Projections (cont'd)
-----------
Valuation Assumptions
(Revenue Detail)
Actual Preliminary Projection
------------------------ Estimated -------------------------------------------
REVENUE DETAIL: 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
CATV Subscribers 53.4 55.2 57.1 58.8 60.4 61.9 63.4 64.9 66.4
QVC "Homes" 39.2 42.9 45.8 47.2 48.4 49.7 50.9 52.1 53.3
QVC Homes as % of CATV Subs 73.4% 77.7% 80.3% 80.3% 80.3% 80.3% 80.3% 80.3% 80.3%
QVC Customers 3.1 3.4 3.7 4.0 4.2 4.5 4.7 5.0 5.2
QVC Customers as % of QVC Homes 7.9% 8.0% 8.1% 8.4% 8.7% 9.0% 9.3% 9.6% 9.8%
Avg Annual Revenue/Home N/a $26.09 $27.55 $29.82 $32.74 $35.90 $39.33 $43.04 $47.05
Avg Annual Revenue/Customer N/a $327.47 $341.87 $362.38 $384.12 $407.17 $431.60 $457.49 $484.94
Total Revenue $922 $1,071 $1,222 $1,386 $1,565 $1,762 $1,978 $2,215 $2,478
---- ------ ------ ------ ------ ------ ------ ------ ------
Annual Growth
--------------------------------
REVENUE DETAIL: 91-93 93-94 94-99
----- ----- -----
CATV Subscribers 3.4% 3.0% 2.4%
QVC "Homes" 8.1% 3.0% 2.4%
QVC Homes as % of CATV Sub 4.6% 0.0% 0.0%
QVC Customers 9.4% 6.8% 5.8%
QVC Customers as % of QVC Homes 1.2% 3.7% 3.3%
Avg Annual Revenue/Home 8.2% 9.6%
Avg Annual Revenue/Customer 6.0% 6.0%
Total Revenue 15.1% 13.4% 12.3%
Note: A 1% point change in "QVC Customers as % of QVC Homes" changes the price
per share by $4.80.
A 1% point change in "Avg Annual Revenue/Customer" growth changes the
purchase price per share by $2.50.
-13- Lazard Freres & Co.
16
- --------------------------------------------------------------------------------
IV. Valuation of QVC (cont'd)
- --------------------------------------------------------------------------------
Projections (cont'd)
-----------
Valuation Assumptions
(Expense Detail)
Actual Preliminary Projection
------------------------ Estimated ---------------------------------------------
EXPENSE DETAIL: 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
COGS $534.6 $621.9 $723.3 $831.8 $939.2 $1,056.9 $1,186.7 $1,329.2 $1,486.5
------ ------ ------ ------ ------ -------- -------- -------- --------
Variable Costs
Order Processing/Customer Service 56.4 60.1 63.4
Commissions and license fees 46.8 57.7 65.4
Provision for doubtful accounts 28.7 27.7 24.8
Credit card processing fee 13.4 14.9 17.6
---- ---- ----
Total Variable 145.3 160.4 171.2 196.9 219.2 246.6 276.9 310.1 346.9
----- ----- ----- ----- ----- ----- ----- ----- -----
General & Administrative
Administrative 34.0 43.2 50.3
Advertising and marketing 35.4 33.4 28.2
Data processing 19.3 18.3 17.4
Broadcasting 10.8 15.3 20.3
Merchandising 5.8 8.0 10.8
Occupancy costs 5.4 5.4 5.7
--- --- ---
Total G&A 110.7 123.6 132.7 165.0 180.0 195.0 210.0 225.0 240.0
----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL EXPENSE $790.6 $905.9 $1,027.2 $1,193.7 $1,338.4 $1,498.5 $1,673.6 $1,864.3 $2,073.4
------ ------ -------- -------- -------- -------- -------- -------- --------
COMMON SIZE
COGS 58.0% 58.1% 59.2% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0%
----- ----- ----- ----- ----- ----- ----- ----- -----
Variable Costs
Order Processing/Customer Service 6.1% 5.6% 5.2%
Commissions and license fees 5.1% 5.4% 5.4%
Provision for doubtful accounts 3.1% 2.6% 2.0%
Credit card processing fee 1.5% 1.4% 1.4%
---- ----- ----
Total Variable 15.8% 15.0% 14.0% 14.2% 14.0% 14.0% 14.0% 14.0% 14.0%
----- ----- ----- ----- ----- ----- ----- ----- -----
General & Administrative
Administrative 3.7% 4.0% 4.1%
Advertising and marketing 3.8% 3.1% 2.3%
Data processing 2.1% 1.7% 1.4%
Broadcasting 1.2% 1.4% 1.7%
Merchandising 0.6% 0.7% 0.9%
Occupancy costs 0.6% 0.5% 0.5%
---- ---- ----
Total G&A 12.0% 11.5% 10.9% 11.9% 11.5% 11.1% 10.6% 10.2% 9.7%
----- ----- ----- ----- ----- ----- ----- ----- ----
TOTAL EXPENSE 85.7% 84.6% 84.1% 86.1% 85.5% 85.1% 84.6% 84.2% 83.7%
----- ----- ----- ----- ----- ----- ----- ----- -----
OCF Margin 14.3% 15.4% 15.9% 13.9% 14.5% 14.9% 15.4% 15.8% 16.3%
----- ----- ----- ----- ----- ----- ----- ----- -----
Annual Growth
--------------------------
COGS 91-93 93-94 94-99
Variable Costs ----- ----- -----
Order Processing/Customer Service 16.3% 15.0% 12.3%
Commissions and license fees
Provision for doubtful accounts
Credit card processing fee
Total Variable 8.5% 15.0% 12.0%
General & Administrative
Administrative
Advertising and marketing
Data processing
Broadcasting
Merchandising
Occupancy costs
Total G&A 9.5% 24.3% 7.8%
---- ----- ----
TOTAL EXPENSE 14.0% 16.2% 11.7%
----- ----- -----
-14- Lazard Freres & Co.
17
- --------------------------------------------------------------------------------
IV. Valuation of QVC (cont'd)
- --------------------------------------------------------------------------------
Analysis at Various Prices
--------------------------
Price per Share $35.00 $37.50 $40.00 $42.50 $45.00 $47.50 $50.00 $52.50 $55.00
Prem./(Disc.) to 6/27/94 Price $33.25 5.3% 12.8% 20.3% 27.8% 35.3% 42.9% 50.4% 57.9% 65.4%
Prem./(Disc.) to 52 Week High $71.50 (51.0%) (47.6%) (44.1%) (40.6%) (37.1%) (33.6%) (30.1%) (26.6%) (23.1%)
Prem./(Disc.) to 52 Week Low $30.38 15.2% 23.5% 31.7% 39.9% 48.1% 56.4% 64.6% 72.8% 81.1%
Fully Diluted Shares Outstanding 55.8 55.8 55.8 55.8 55.8 55.8 55.8 55.8 55.8
Adjusted Market Value(1) $1,662 $1,802 $1,941 $2,081 $2,220 $2,360 $2,500 $2,639 $2,779
Subtract: Cash (87) (87) (87) (87) (87) (87) (87) (87) (87)
---- ---- ---- ---- ---- ---- ---- ---- ----
Market Capitalization $1,575 $1,715 $1,854 $1,994 $2,133 $2,273 $2,413 $2,552 $2,692
----- ----- ----- ----- ----- ----- ----- ----- -----
Market Capitalization as
a Multiple of:
- ------------------------
Revenues
LTM $1,245 1.3x 1.4x 1.5x 1.6x 1.7x 1.8x 1.9x 2.0x 2.2x
1994E 1,386 (2) 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9
1995E 1,565 (2) 1.0 1.1 1.2 1.3 1.4 1.5 1.5 1.6 1.7
EBITDA
LTM 195 8.1x 8.8x 9.5x 10.2x 10.9x 11.6x 12.4x 13.1x 13.8x
1994E 193 (2) 8.2 8.9 9.6 10.3 11.1 11.8 12.5 13.2 14.0
1995E 227 (2) 6.9 7.6 8.2 8.8 9.4 10.0 10.6 11.2 11.9
EBIT
LTM 153 10.3x 11.2x 12.1x 13.1x 14.0x 14.9x 15.8x 16.7x 17.6x
1994E 148 (2) 10.7 11.6 12.5 13.5 14.4 15.4 16.3 17.3 18.2
1995E 181 (2) 8.7 9.4 10.2 11.0 11.8 12.5 13.3 14.1 14.8
Adjusted Market Value as a Multiple of:
- --------------------------------------
Net Income
LTM $50 33.4x 36.2x 39.0x 41.8x 44.6x 47.4x 50.2x 53.0x 55.9x
1994E 69 (2) 24.0 26.0 28.0 30.0 32.0 34.0 36.0 38.0 40.0
- -------------------
(1) Deducts option and warrant proceeds of $292.0 million.
(2) Source for projected data: Concast; 1994E and 1995E refer to the years
ended 1/1/95 and 1/1/96 respectively.
Note: LTM numbers are for the period ending 4/30/94.
-15- Lazard Freres & Co.
18
- -------------------------------------------------------------------------------
IV. Valuation of QVC (cont'd)
- -------------------------------------------------------------------------------
Stock Trading History
---------------------
QVC
From 7/2/93 to 7/11/94
1 Year Perspective
The chart describes that QVC stock trading history for the one year
period between 7/2/93 and 9/11/94. The per share daily closing price of QVC
stock on the selected dates was as follows.
QVC Price
Date Per Share
---- ---------
7/2/93 61.50
8/20/93 65.25
10/08/93 56.50
12/03/93 46.25
1/21/94 44.00
3/11/94 40.875
4/29/94 35.625
6/17/94 34.00
-16- Lazard Freres & Co.
19
- -------------------------------------------------------------------------------
IV. Valuation of QVC (cont'd)
- -------------------------------------------------------------------------------
Stock Trading History
---------------------
QVC
From 7/7/89 to 7/11/94
5 Year Perspective
The chart describes the QVC stock trading history for the five year period
between 7/7/89 and 4/22/94. The per share closing price of QVC stock on the
selected dates was as follows:
QVC Price
Date Per Share
-------- ---------
7/07/89 17.875
12/29/89 16.50
6/22/90 12.625
12/14/90 4.25
6/07/91 11.875
11/29/91 13.375
5/22/92 21.50
11/13/92 23.125
5/07/93 55.625
10/29/93 55.75
4/22/94 37.35
-17- Lazard Freres & Co.
20
- --------------------------------------------------------------------------------
IV. Valuation of QVC (cont'd)
- --------------------------------------------------------------------------------
Comparable Companies Summary
----------------------------
Home Int'l Family QVC
BET CUC Gaylord Shopping Entertainment Network
--- --- ------- -------- ------------- -------
Ticker BTV CU GET HSN FAM QVCN
Latest Quarter End 04/30/94 04/30/94 03/31/94 03/31/94 03/31/94 04/30/94
Latest Fiscal Year End 07/31/93 01/31/94 12/31/93 12/31/93 12/31/93 01/31/94
Price @ 7/11/94 $15.13 $26.63 $23.25 $11.13 $16.00 $35.75
Shares Outstanding - Fully Diluted 20.8 115.7 87.4 95.2 33.5 55.9
Shares Outstanding - Primary 20.5 113.6 87.3 93.9 33.5 40.2
Market Value $309.7 $3,051.8 $2,030.1 $1,049.2 $535.5 $1.706.2
Add: Net Debt ( 14.4) (120.1) 357.8 66.6 87.0 (10.1)
------ -------- -------- ------- ------- --------
Market Capitalization $295.3 $2,931.7 $2,387.9 $1,115.8 $622.5 $1,696.1
Market Capitalization To:
- -------------------------
LTM Revenue 3.2x 3.2x 3.8x 1.0x 2.9x 1.4x
LFY + 1 E Revenue 3.0x 2.9x 3.5x 0.9x 2.7x 1.2x
LFY + 2 E Revenue 2.6x 2.4x 3.1x 0.8x 2.4x 1.1x
LTM EBITDA 9.5x 16.0x 16.9x 25.5x 20.2x 8.7x
LFY + 1 E EBITDA 9.3x 13.3x 15.0x 11.5x NA 8.8x
LFY + 2 E EBITDA 8.0x N/A 13.1x 6.6x NA 7.5x
LTM EBIT 11.1x 18.6x 21.5x 49.1x 27.3x 11.1x
LFY + 1 E EBIT 11.7x 15.6x 17.7x 15.9x NA 11.5x
LFY + 2 E EBIT 9.9x 12.9x 15.1x 7.8x NA 9.4x
P/E:
- ----
LTM 19.2x 32.1x 30.6x 139.1x 48.5x 39.3x
LFY + 1 E 21.3x 27.2x 24.5x 24.7x 17.6x NM
LFY + 2 E 18.0x 22.2x 21.1x 12.4x 14.0x NM
LFY + 1 E 18.7x 26.9x 25.8x 22.7x 31.4x 26.5x
LFY + 2 E 15.1x 21.5x 21.7x 12.4x 16.3x 18.4x
-18- Lazard Freres & Co.
21
- --------------------------------------------------------------------------------
V. Summary of Recent Research Reports
- --------------------------------------------------------------------------------
Cash Flow
Estimate/
Growth Over EPS Estimate/
Prior Year/ Growth Over Projected
Margin Prior Year 1994 Mult.
Stock --------------- -------------- ------------- 1994E Target
Firm Date Price Recommendation 1994 1995 1994 1995 EBITDA P/E Stock Price
- ---- ---- ----- -------------- ---- ---- ---- ---- ------ --- -----------
Oppenheimer & Co. 06/24/94 $33.25 Special Research $190 $232 $1.25 $1.75 8.75x 26.6x $46.26
- ----------------- Series Recommended (3%) 22% (20%) 40%
List 14%
Key Comments:
o Believe strong growth will come from investments in talent and growth
opportunities (e.g., international expansion, additional domestic channels).
o Also see positives in QVC's distribution, brand value and credibility of
service, and good inventory control.
o View competition to be several years down the road and belive QVC will
defend its turf vigorously.
o Projected revenue increase: 1994 = 13%, 1995 = 15%.
o Projected cash flow growth in 1996 = 24%.
CS First Boston
- --------------- 05/20/94 $31.50 Hold $213 $252 $1.30 $1.70 -- 24.2x --
9% 18% (12%) 31%
16% 17%
Key Comments:
o Recently downgraded due to growing uncertainty regarding the
company's future growth prospects.
o Recognize competition coming.
o See limited appeal of the current programming and merchandise offering, so
applaud the establishment of Q2.
o Believe the whole field of TV shopping was overhyped last year.
o Advise keeping things in perspective since many other retail concepts
(e.g., Wal-Mart) growing as fast or faster.
o Projected revenue increases: 1994 = 10%, 1995 = 12%.
-19- Lazard Freres & Co.
22
- -------------------------------------------------------------------------------
V. Summary of Recent Research Reports (cont'd)
- -------------------------------------------------------------------------------
Cash Flow
Estimate/
Growth Over EPS Estimate/
Prior Year/ Growth Over Projected
Margin Prior Year 1994 Mult.
Stock --------------- -------------- ------------- 1994E Target
Firm Date Price Recommendation 1994 1995 1994 1995 EBITDA P/E Stock Price
- ---- ---- ----- -------------- ---- ---- ---- ---- ------ --- -----------
Kemper Securities 04/7/94 $40.00 Hold/High Risk $212 -- $1.40 -- -- 28.6x --
- ----------------- 9% (6%)
16%
Key Comments:
o Increased competition from other video home shopping retailers (e.g.,
Spiegel, Macy's, CUC with Cablevision and Continental, CUC with Time
Warner, MTV, and the RBOC's).
o Channel capacity has provided some protection, though see the
constraint fading over the next few years.
o Projected revenue increases 1994 = 14%, 1995 = 9%.
-20- Lazard Freres & Co.
1
Exhibit (b)(2)
LAZARD FRERES & CO.
One Rockefeller Plaza
New York, N.Y. 10020
---
Telephone (212) 632-6000
Facsimile (212) 632-6060
NEW YORK
July 12, 1994
The Board of Directors
Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102-4735
Dear Members of the Board:
We understand that Comcast Corporation (the "Company") intends to
propose to the Board of Directors of QVC, Inc. ("QVC") that the Company and
QVC enter into a definitive merger agreement contemplating an acquisition of
QVC by the Company (the "Transaction"), pursuant to the terms of which all of
the outstanding shares of common stock and preferred stock of QVC (other than
those shares owned by the Company) would be acquired at a price per common
share or common share equivalent equal to $37.00 in cash and $7.00 liquidation
preference of shares of newly issued 7.50% convertible exchangeable preferred
stock of the Company, each share of which will be convertible into shares of
the Company's Class A Special Common Stock at $21.00 per share. The Company
would reserve the right to substitute cash for some or all of such shares of
preferred stock, with the substitution being effected through a reduction of
the liquidation preference of the preferred stock on a dollar-for-dollar basis
for the amount of cash added.
You have requested our opinion as to the fairness, from a financial
point of view, to the Company of the Transaction. In connection with rendering
this opinion, we have:
(i) reviewed the proposed terms of the Transaction as
outlined in the form of offer letter to be sent by
the Company to QVC;
(ii) reviewed certain publicly available historical
business and financial information relating to the
Company and QVC;
2
The Board of Directors
July 12, 1994
Page 2
(iii) held discussions with the senior management of the
Company concerning the Company's objectives in
pursuing the Transaction, its intended method of
financing the Transaction and certain other matters;
(iv) reviewed certain publicly available information with
respect to certain other companies in lines of
businesses we believe to be comparable to the
businesses of the Company and QVC;
(v) reviewed the financial terms of certain recent
business combinations involving companies in lines of
businesses we believe to be comparable to those of
the Company and QVC, and in other industries
generally;
(vi) analyzed the pro forma financial impact of the
Transaction on the Company;
(vii) reviewed the historical stock prices and trading
volumes of the Company's common stock and QVC's
common stock; and
(viii) conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have relied upon the accuracy and completeness of the financial and
other information concerning the Company and QVC that has been reviewed by us
and have not undertaken any independent verification of such information or any
independent valuation or appraisal of any of the assets of the Company or QVC.
In addition, in connection with rendering this opinion, we have neither
reviewed financial forecasts or other nonpublic information prepared or
provided by QVC nor conducted discussions with management of QVC.
In rendering our opinion, we have assumed that the Transaction will be
consummated on the terms described above and that obtaining the necessary
regulatory approvals for the Transaction will not have an adverse effect on the
Company or QVC or on the financial terms
3
The Board of Directors
July 12, 1994
Page 3
for the Company of the Transaction. Our opinion is necessarily based on
economic, monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We are acting as financial advisor to the Company in connection with the
Transaction and will receive fees for such services, a substantial portion of
which fees are contingent upon the consummation of the Transaction. Our firm
has in the past provided and is currently providing investment banking and
financial advisory services for the Company and has received fees for rendering
such services.
Our engagement and the opinion expressed herein are solely for the
benefit of the Company's Board of Directors and are not on behalf of, and are
not intended to confer rights or remedies upon, QVC, any stockholders of the
Company or QVC or any other person other than the Company's Board of Directors.
It is understood that, except for inclusion in a proxy statement relating to the
Transaction, this letter may not be disclosed or otherwise referred to without
our prior written consent, except as may otherwise be required by law or by a
court of competent jurisdiction.
Based on and subject to the foregoing and such other factors as we deem
relevant, we are of the opinion that, as of the date hereof, the consideration
to be paid to the stockholders of QVC in connection with the Transaction is
fair, from a financial point of view, to the Company.
Very truly yours,
/s/ Lazard Freres & Co.
Lazard Freres & Co.
1
EXHIBIT (b)(3)
[LETTERHEAD OF]
LAZARD FRERES & CO.
August 4, 1994
The Board of Directors
Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102-4735
Dear Members of the Board:
We understand that Comcast Corporation (the "Company"), together with
Liberty Media Corporation ("Liberty") and Comcast QMerger, Inc., a jointly owned
subsidiary of the Company and Liberty ("QVC Holdings"), has entered into a
definitive merger agreement with QVC, Inc. ("QVC"), dated the date hereof (the
"Merger Agreement"), which provides for the acquisition of QVC by QVC Holdings
(the "Transaction"). We understand that the Transaction will be accomplished
through a tender offer (the "Offer") by QVC Holdings, or a subsidiary thereof,
for all of the outstanding shares of common stock and preferred stock of QVC
(other than those shares owned by the Company and Liberty), followed by a merger
(the "Merger") of QVC Holdings, or a subsidiary thereof, with and into QVC, with
QVC to be the surviving corporation in the Merger. The price to be paid for each
share pursuant to the Offer and the Merger is $46.00 per share of common stock
and $460.00 per share of preferred stock.
You have requested our opinion as to the fairness, from a financial point
of view, to the Company of the Transaction. In connection with rendering this
opinion, we have:
(i) reviewed the Merger Agreement and the financial terms of the
Transaction as set forth therein;
(ii) reviewed certain publicly available historical business and financial
information relating to the Company and QVC;
(iii) held discussions with the senior management of the Company concerning
the Company's objectives in pursuing the Transaction, its intended
method of financing the Transaction and certain other matters;
(iv) reviewed certain publicly available information with respect to
certain other companies in lines of businesses we believe to be
comparable to the businesses of the Company and QVC;
(v) reviewed the financial terms of certain recent business combinations
involving companies in lines of businesses we believe to be comparable
to those of the Company and QVC, and in other industries generally;
(vi) analyzed the pro forma financial impact of the Transaction on the
Company;
(vii) reviewed the historical stock prices and trading volumes of the
Company's common stock and QVC's common stock; and
(viii) conducted such other financial studies, analyses and investigations
as we deemed appropriate.
We have relied upon the accuracy and completeness of the financial and
other information concerning the Company and QVC that has been received by us
and have not undertaken any independent verification of such information or any
independent valuation or appraisal of any of the assets of the Company or QVC.
2
In rendering our opinion, we have assumed that the Transaction will be
consummated on the terms described above and that obtaining the necessary
regulatory approvals for the Transaction will not have an adverse effect on the
Company or QVC or on the financial terms for the Company of the Transaction. Our
opinion is necessarily based on economic, monetary, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof.
We are acting as financial advisor to the Company in connection with the
Transaction and will receive fees for such services, a substantial portion of
which fees are contingent upon the consummation of the Transaction. Our firm has
in the past provided and is currently providing investment banking and financial
advisory services for the Company and has received fees for rendering such
services.
Our engagement and the opinion expressed herein are solely for the benefit
of the Company's Board of Directors and are not on behalf of, and are not
intended to confer rights or remedies upon, QVC or Liberty, any stockholders of
the Company, QVC or Liberty, or any other person other than the Company's Board
of Directors. It is understood that, except for inclusion in an offer to
purchase relating to the Offer, this letter may not be disclosed or otherwise
referred to without our prior written consent, except as may otherwise be
required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing and such other factors as we deem
relevant, we are of the opinion that, as of the date hereof, the consideration
to be paid to the stockholders of QVC in connection with the Transaction is
fair, from a financial point of view, to the Company.
Very truly yours,
1
Exhibit (b)(5)
PROJECT QVC
CONFIDENTIAL
ALLEN & COMPANY INCORPORATED AUGUST 4, 1994
2
CONFIDENTIAL
FAIRNESS OPINION
REGARDING THE PROPOSED $46 PER SHARE CASH OFFER FOR ALL
OF THE OUTSTANDING SHARES OF QVC, INC ("QVC") BY COMCAST
CORPORATION ("COMCAST") AND LIBERTY MEDIA CORPORATION ("LIBERTY")
ALLEN & COMPANY INCORPORATED AUGUST 4, 1994
3
PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
TABLE OF CONTENTS
Tab
---
Basis of Opinion I
Description of the Proposed Transaction II
Analysis of QVC III
- Overview of QVC
- Historical Operating Statements
- Projected Operating Statements
- Consolidated Balance Sheet
- Common Stock Price Performance
- Market Multiple Comparison
Transaction Analysis IV
- Discounted Cash Flow Analysis
- Premium Paid in Proposed Transaction
- Multiples Paid in Comparable Transactions
Summary V
Conclusion VI
4
PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
BASIS OF OPINION
AMONG OTHER ITEMS WE:
REVIEWED:
* Trends in the Cable Programming and Electronic Retailing Industries
* Business Prospects and Financial Condition of QVC
* Historical Business Information and Financial Results of QVC
* Non-Public Financial and Operating Results of QVC
* Financial Projections and 1994 Budget Prepared by the Management of QVC
* Information Obtained From Meetings with Senior Management of QVC
* Trading Range of QVC Common Stock
* Public Financial Information of Comparable Companies in the Cable
Programming and Specialty Retailing Industries
Page 1
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
BASIS OF OPINION (CONTINUED)
REVIEWED (Continued):
* Public Financial and Transaction Information Related to Comparable
Mergers and Acquisitions
* Terms and Conditions of the Merger Agreement and Related Documents
ANALYZED:
* The Terms of the Proposed Transaction
* QVC's Present Condition and Prospects
* Trading History of QVC's Common Stock Related to Selected Public
Announcements Regarding the Company
* Trading History of QVC's Common Stock Compared to that of Comparable
Companies and Other Market Indices
* The Stock Price and Market Multiples of QVC Compared to those of
Selected Cable Programmers and Selected Specialty Retailers
* The Discounted Cash Flow Value Per Share of QVC Based on Management's
Financial Forecast
* Premiums and Multiples Paid in Comparable All Cash and Cash and Stock
Transactions
Page 2
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
DESCRIPTION OF THE PROPOSED TRANSACTION
* The Proposed Transaction Is in the Form of a Tender Offer for a
Majority of the Common Stock of QVC with a Subsequent Merger for the
Same Consideration
* Holders of Common Stock, Other Than Comcast and Liberty, Are Offered
$46 Per Share in Cash
* Holders of Convertible Preferred Stock, Other Than Comcast and
Liberty, Will Receive $460 Per Share in Cash
* Outstanding QVC Options Are Cashed Out at $46 Per Share Net of Their
Exercise Price
* The Transaction Values All Of QVC's Outstanding Shares at
Approximately $2.6 Billion
* Net Proceeds to Shareholders, Other Than Comcast and Liberty, Is
Approximately $1.4 Billion
Page 3
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
OVERVIEW OF QVC
* Major Cable Television Shopping Company with Budgeted 1994 Revenues of
$1.4 Billion, Operating Income of $154 Million and Operating Cash Flow
of $202 Million
* Market Value of $1.6 Billion as of June 29, 1994, Prior to QVC/CBS
Merger Announcement
* Two New Domestic Shopping Services, Q2 and onQ, Launched in May 1994
* International Joint Ventures with BSkyB in the United Kingdom and Grupo
Televisa in Mexico
- Opportunity to Expand Customer Base and Increase Sales
- Challenge to Penetrate Market through Limited Cable Infrastructure,
Especially in the UK
* Company Incurred a $34.8 Million Charge in the Fourth Quarter of 1993
from Expenses in the Paramount Takeover Battle
* Significant Opportunity for Growth in the Near Term from Increasing
Acceptance of Home Shopping Industry
* Challenge of Increasing Competition in the Home Shopping Industry
- New Entrants to the Market May Include Macy's, Spiegel, and the
S Channel
* Decreasing Growth Rate of Base Business Has Raised Concern About Future
Prospects for the Company
Page 4
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC HISTORICAL OPERATING STATEMENTS
(In Millions, Except Per Share Data)
Actual
----------------------------------------------- Budget
1990 1991 1992 1993 1994
===================================================================================
Net Sales $776 $922 $1,071 $1,222 $1,367
Growth 71.2% 18.8% 16.1% 14.2% 11.9%
Operating Income 29 84 118 152 154
Operating Cash Flow 76 131 165 195 202
Growth 96.3% 73.2% 25.6% 18.3% 3.4%
Free Cash Flow * (15) 125 80 26 40
Net Income * (17) 20 55 59 65
Growth NM NM 179.5% 7.6% 10.0%
Net Income Per Share * ($0.98) $0.62 $1.26 $1.18 $1.33
- ------------------------------------
* Includes costs of Paramount tender offer of $35 million in 1993.
Page 5
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PROJECT QVC CONFIDENTIAL August 4, 1994
QVC PROJECTED OPERATING STATEMENTS
(In Millions, Except Per Share Data)
Projected
Budget --------------------------------------------------------
1994 1995 1996 1997 1998 1999
===========================================================================================
Net Sales $1,367 $1,621 $2,052 $2,421 $2,785 $3,202
Growth 11.9% 18.5% 26.6% 18.0% 15.0% 15.0%
Operating Income 154 206 304 366 435 516
Operating Cash Flow 202 262 356 425 499 586
Growth 3.4% 29.7% 36.1% 19.3% 17.5% 17.3%
Operating Cash Flow,
Not Including
Q2 Startup Costs 219 266 356 425 499 586
Free Cash Flow 40 53 134 174 217 279
Net Income 65 96 154 189 228 278
Growth 10.0% 47.3% 59.8% 23.1% 20.9% 21.6%
Net Income Per
Share $1.33 $1.95 $3.12 $3.84 $4.64 $5.64
Page 6
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC CONSOLIDATED BALANCE SHEET
(In Millions, Except Per Share Data)
April 30, LIABILITIES & April 30,
ASSETS 1994 SHAREHOLDERS' EQUITY 1994
========================================= ==============================================
Cash and Marketable Securities $20 Current Maturities of Debt $3
Receivables 170 Accounts Payable 70
Inventories 157 Other Current Liabilities 216
----
Deferred Taxes and Other 67 Total Current Liabilities 289
----
Total Current Assets 414
Net Property Plant & Equipment 79 Long-Term Debt 7
Cable TV Distribution Rights 96 Shareholders' Equity 576
Goodwill 249
Other 34
----
Total Assets $872 Total Liabilities & Shareholders' $872
==== Equity ====
Page 7
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC COMMON STOCK PRICE PERFORMANCE
* QVC Common Stock Price and Trading Volume Data
* Market Reaction to Selected Public Announcements
* QVC Common Stock Price Behavior Compared to:
- S&P 500
- Index of Cable Programming Companies
- Index of Specialty Retail Companies
Page 8
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC COMMON STOCK PRICE AND TRADING VOLUME
[GRAPHICAL MATERIAL]
Daily closing price and volume traded of QVC Common Stock from
01/01/92 to 08/02/94.
The following dates are highlighted:
* 12/10/92 Diller buys $25 MM stake
(Closing Price on 12/11/92: $37.13, up 12.5%, Volume
2,636,600 Shares)
* 01/19/93 Diller joins QVC
(Closing Price $41.00, Volume 599,600 Shares)
* 07/12/93 Plans to merge with HSN announced
(Closing Price $67.75, Volume 1,870,100 Shares)
* 09/20/93 - 02/15/94 Paramount takeover battle
(Closing Price on 09/20/93: $56.00, Volume 1,353,800
Shares)
(Closing Price on 02/15/94: $50.25, Volume 2,666,700
Shares)
* 6/30/94 QVC - CBS Merger announced
(Closing Price $38.00, Volume 1,709,500 Shares)
* 07/12/94 Comcast bids for QVC
(Closing Price on 7/13/94: $42.00, Volume 7,314,000
Shares)
Page 9
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC COMMON STOCK PRICE PERFORMANCE VERSUS MARKET INDICES
[GRAPHICAL MATERIAL]
Weekly Indexed comparison of QVC Common Stock closing prices
versus S&P 500 Index, Cable Programming Company Index, and
Specialty Retail Company Index from 01/01/92 to 08/02/94.
Cable Programming Company Index is comprised of: GET, FAM, TBS.A
and TBS.B.
Specialty Retail Company Index is comprised of: BV, HD, LOW, MES,
PCCW and TOY.
All indices are market capitalization weighted.
Page 10
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC COMMON STOCK TRADING PERFORMANCE AND MARKET REACTION TO SELECTED
PUBLIC ANNOUNCEMENTS
* QVC Common Stock Is Freely and Actively Traded on NASDAQ
* QVC Common Stock Traded in the Range of $37.25 to $72.50 for
the Year 1993 with an Average Daily Volume of 466,794 Shares
* QVC Common Stock Traded in the Range of $30.00 to $51.50 from
January 1, 1994 to June 29, 1994, the Day Prior to the QVC/CBS
Merger Announcement, with an Average Daily Volume of 553,890
Shares
* From June 30, 1994 to July 12, 1994, the Trading Day Prior to
the Announcement of the Comcast Offer, QVC Common Stock Traded
in the Range of $35.75 to $38.00 with an Average Daily Volume
of 688,125 Shares and an Average Price of $36.73 Per Share
* From July 13, 1994 to August 2, 1994, QVC Common Stock Traded
in the Range of $42.00 to $46.00 with an Average Daily Volume
of 1,244,253 Shares and an Average Price of $44.78 Per Share
* General Trading Patterns for QVC Common Stock Were Not in Line
with an Index of Comparable Companies from December 1992
through August 1994
Page 11
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC COMMON STOCK TRADING PERFORMANCE AND MARKET REACTION TO SELECTED
PUBLIC ANNOUNCEMENTS (CONTINUED)
* From December 1992, when Barry Diller Became Associated with
the Company, through August 1993, QVC Stock Had a Spectacular
Period of Price Appreciation
* From September 1993 through February 1994, QVC Stock Was
Influenced by the Company's Participation in the Paramount
Takeover Battle, Announcements of New Competitors Entering the
Home Shopping Industry, Perceived Slowdown in Growth of the
Company's Base Business, Start Up Costs of Q2 and Concern
About the Company's Involvement in International Joint
Ventures
* Since June 30, 1994, There Has Been Speculative Activity in
QVC Stock Prompted by the QVC/CBS Merger Announcement and the
Announcement of the Comcast Offer
* QVC Common Stock Price of $44.25 as of August 2, 1994
Reflected a Speculative Takeover Premium Due to the
Comcast/Liberty Offer and Speculation Regarding Other Bidders
and a QVC Self-Tender
* QVC Common Stock Price of $36.00 as of July 12, 1994, the
Trading Day Prior to the Announcement of the Comcast Offer,
Reflected a Premium Due to the Proposed Merger with CBS
* For the Twenty Trading Days Prior to June 30, 1994, the Date
of the QVC/CBS Merger Announcement, QVC Common Stock Traded in
the Range of $32.38 to $36.00 with an Average Daily Volume of
185,560 Shares and an Average Price of $33.83 Per Share
Page 12
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC COMMON STOCK TRADING PERFORMANCE AND MARKET REACTION TO SELECTED
PUBLIC ANNOUNCEMENTS (CONTINUED)
* For the Ten Trading Days Prior to June 30, 1994, the Date of
the QVC/CBS Merger Announcement, QVC Common Stock Traded in
the Range of $32.38 to $34.00 with an Average Daily Volume of
153,690 Shares and an Average Price of $33.26 Per Share
* QVC Common Stock as of June 29, 1994, the Day Prior to the
QVC/CBS Merger Announcement, Closed at $32.38 Per Share and in
Our Opinion Was a Representative Price for that Security
Page 13
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC MARKET MULTIPLE COMPARISON
COMPARED QVC TO:
* Home Shopping Network, Inc.
* Publicly-Traded Cable Programming Companies
- Gaylord Entertainment Company
- International Family Entertainment, Inc.
- Turner Broadcasting System, Inc.
* Publicly-Traded Specialty Retail Companies
- Blockbuster Entertainment Corporation
- The Home Depot, Inc.
- Lowe's Companies, Inc.
- Melville Corporation
- Price/Costco, Inc.
- Toys 'R' Us, Inc.
Page 14
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC MARKET MULTIPLE COMPARISON
TOTAL MARKET CAPITALIZATION TO LTM SALES (1)
[TABLE REPLACES BAR CHART]
As of 06/29/94 As of 07/12/94 As of 08/02/94(2)
-------------- -------------- -----------------
QVC 1.26 x 1.40 x 1.79 x
Cable Programming Companies 3.22 x 3.17 x 3.18 x
Specialty Retail Companies 1.24 x 1.27 x 1.24 x
(1) Comparable Company multiples are average multiples for each
group. See detail in Common Stock Comparison analyses located
in Exhibits.
(2) QVC multiple based on offering price of $46.00 per share. All
other multiples based on closing stock prices for comparable
companies as of 08/02/94.
Page 15
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC MARKET MULTIPLE COMPARISON
TOTAL MARKET CAPITALIZATION TO LTM OPERATING CASH FLOW (1) (3)
[TABLE REPLACES BAR CHART]
As of 06/29/94 As of 07/12/94 As of 08/02/94(2)
-------------- -------------- -----------------
QVC 8.0 x 8.9 x 11.4 x
Cable Programming Companies 19.3 x 19.1 x 19.2 x
Specialty Retail Companies 10.5 x 10.8 x 10.7 x
(1) Comparable Company multiples are average multiples for each
group. See detail in Common Stock Comparison analyses located
in Exhibits.
(2) QVC multiple based on offering price of $46.00 per share. All
other multiples based on closing stock prices for comparable
companies as of 08/02/94.
(3) Operating Cash Flow known as EBITDA in Common Stock Comparison
analyses.
Page 16
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC MARKET MULTIPLE COMPARISON
MARKET VALUE OF EQUITY TO LTM EPS (1)
[TABLE REPLACES BAR CHART]
As of 06/29/94 As of 07/12/94 As of 08/02/94(2)
-------------- -------------- -----------------
QVC 21.3 x 23.6 x 30.2 x
Cable Programming Companies 38.5 x 38.0 x 37.4 x
Specialty Retail Companies 23.1 x 23.6 x 24.0 x
(1) Comparable Company multiples are average multiples for each
group. See detail in Common Stock Comparison analyses located
in Exhibits.
(2) QVC multiple based on offering price of $46.00 per share. All
other multiples based on closing stock prices for comparable
companies as of 08/02/94.
Page 17
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC MARKET MULTIPLE COMPARISON
Market Value of Equity to 1994E EPS(1)
[TABLE REPLACES BAR CHART]
As of 06/29/94 As of 07/12/94 As of 08/02/94(2)
-------------- -------------- ---------------
QVC(3) 20.2 x 22.4 x 28.7 x
Cable Programming Companies 19.7 x 19.3 x 19.0 x
Specialty Retail Companies 18.3 x 18.7 x 19.0 x
(1)Comparable Company multiples are average multiples for each
group. See detail in Common Stock Comparison analyses located
in Exhibits.
(2)QVC multiple based on offering price of $46.00 per share. All
other multiples based on closing stock prices for comparable
companies as of 08/02/94.
(3)QVC multiples of 20.2 x, 22.4 x and 28.7 x represent 1994E EPS
excluding Q2 startup costs as of 06/29/94, 07/12/94 and the
offering price, respectively. 1994E EPS including Q2 startup
costs results in multiples of 24.2 x, 26.9 x and 34.3 x 1994E
EPS as of 06/29/94, 07/12/94 and the offering price,
respectively.
Page 18
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC MARKET MULTIPLE COMPARISON
* Compared QVC Trading Multiples to those of Cable Programming
Companies and Specialty Retail Companies
* For the Dates Considered, QVC Traded at Multiples Closely
Related to Specialty Retail Companies
* QVC Stock Prices as of July 12, 1994 and August 2, 1994
Traded at Multiples of LTM Sales, Operating Cash Flow, LTM
EPS and 1994E EPS that Were Higher (Except in One Case)
than the Range for Specialty Retail Companies
* As of June 29, 1994, QVC Traded at Multiples of LTM Sales,
Operating Cash Flow, LTM EPS and 1994E EPS which Were
within the Range of Multiples for Specialty Retail
Companies and at a Multiple of 1994E EPS that Was Higher
than the Average for Cable Programming and Specialty Retail
Companies
Page 19
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
QVC DISCOUNTED CASH FLOW ANALYSIS
(In Millions, Except Per Share Data)
Projected
Budget -------------------------------------------
1994 1995 1996 1997 1998 1999
===================================================================================================
Unlevered Free Cash Flow From Operations $33 $46 $126 $165 $207 $263
Net Per Share Present Value of
Company Based on Discounted Cash Flows:
Multiple of 1999 Estimated EBITDA
Discount --------------------------------------------
Rate 7.0 x 8.0 x 9.0 x
-------- ------ ------ ------
15.0% $49.00 $53.94 $58.88
17.5% 44.54 48.94 53.33
20.0% 40.64 44.56 48.48
22.5% 37.20 40.71 44.22
25.0% 34.18 37.33 40.47
Page 20
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
PREMIUM PAID IN PROPOSED TRANSACTION
* Comcast/Liberty Offer Price: $46.00 Per Share
Premium Over QVC Stock Price as of:
Stock Price Premium
----------- -------
June 29, 1994 $32.38 42.1%
10 Trading Days Prior to June 29, 1994 33.26 38.3%
20 Trading Days Prior to June 29, 1994 33.83 36.0%
July 12, 1994 36.00 27.8%
August 2, 1994 44.25 4.0%
* Premiums Paid in Selected All Cash Merger Transactions:(1)
Average Premium 38.6%
High 82.5%
Low 10.0%
(1) See detail in Comparison of Selected Acquisitions located in
Exhibits.
Page 21
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
MULTIPLES PAID IN COMPARABLE TRANSACTIONS
TRANSACTIONS REVIEWED:
* Major Media Mergers and Acquisitions within the Last Five Years
- Transaction Values in Excess of $1.0 Billion
- Transactions with All Cash or Cash and Stock
Consideration
- Acquisition of 100% of Company
* Acquisitions of All or a Significant Portion of Cable Programmers
within the Last Ten Years
- Transactions with All Cash or Cash and Stock
Consideration
* Mergers and Acquisitions of Specialty Retailers and Selected
General Retailers within the Last Five Years
- Transactions with All Cash or Cash and Stock
Consideration
Page 22
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
MULTIPLES PAID IN COMPARABLE TRANSACTIONS
Multiples Paid in Selected Acquisitions in Comparable Industries
Transaction Price as a Multiple of:
-------------------------------------------------------------------
Sales EBITDA Net Income Book Value
----- ------ ---------- ----------
Comcast / Liberty Offer for QVC(1) 1.79 x 11.4 x 29.2 x 3.89 x
Comparable Transactions in(2):
Media -- Average 1.91 x 11.7 x 21.3 x 2.54 x
High 6.22 25.9 25.8 3.91
Low 0.81 1.1 18.5 1.52
Cable Programming -- Average NA 12.1 x NA NA
High NA 30.0 NA NA
Low NA 5.7 NA NA
Retail -- Average 0.55 x 9.6 x 19.9 x 2.82 x
High 0.99 14.3 27.2 4.34
Low 0.10 7.9 10.7 0.53
(1) Based on offering price of $46.00 per share.
(2) See detail in Comparison of Selected Acquisitions located in Exhibits.
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
SUMMARY
* QVC Common Stock Is Freely and Actively Traded on the NASDAQ
* QVC Common Stock Price Behavior Was Affected by Various Events
From December 1992 through August 2, 1994
* QVC Common Stock Price Between June 30, 1994 and August 2, 1994
Reflected a Potential Merger or Acquisition Premium
* QVC Common Stock Price of $32.38 Per Share on June 29, 1994, the
Day Prior to the Announcement of the Proposed Transaction with
CBS, Traded In-Line with the Range of Multiples of Comparable
Companies
* QVC Common Stock Price of $32.38 Per Share on June 29, 1994, the
Day Prior to the Announcement of the Proposed Transaction with
CBS, in Our Opinion Is a Representative Price for that Security
* The Proposed Offer of $46 Per Share is In-Line with Our
Discounted Cash Flow Per Share Analysis of QVC Common Stock
* The Proposed Offer of $46 Per Share is within the Range of
Premiums Paid in Comparable Transactions
* The Proposed Offer of $46 Per Share is within the Range of
Multiples Paid in Comparable Transactions
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PROJECT QVC CONFIDENTIAL AUGUST 4, 1994
CONCLUSION
Based on the Foregoing, We Are of the Opinion that the Consideration
to be Received in Connection with the Merger by the Holders of QVC Stock and
QVC Options Pursuant to the Merger Agreement Is Fair to Such Holders,
Other Than Comcast and Liberty, from a Financial Point of View.
Page 25
1
Exhibit (d)(8)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
QVC, Inc.:
We consent to the use of our report dated March 4, 1994, with respect to
the consolidated balance sheets of QVC, Inc. and subsidiaries as of January 31,
1994 and 1993, and the related consolidated statements of operations,
shareholders' equity, and cash flows and related schedules for each of the years
in the three-year period ended January 31, 1994, which report appears in Annex C
to the Offer to Purchase which is incorporated by reference in the Schedule
13E-3 of QVC, Inc., QVC Programming Holdings, Inc. and Comcast Corporation and
Tele-Communications, Inc. dated August 11, 1994.
Our report refers to a change in accounting for income taxes.
KPMG PEAT MARWICK
Philadelphia, Pennsylvania
August 11, 1994
