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(2)听听听Tracking Stocks

A tracking stock is a type of common stock that the issuing company intends to reflect or "track" the economic performance of a particular business or "group," rather than the economic performance of the company as a whole. Liberty has two tracking stocks鈥擰VC Group common stock and Liberty Ventures common stock, which are intended to track and reflect the economic performance of the Liberty QVC Group and the Ventures Group, respectively (as defined below).

While the QVC Group and the Ventures Group have separate collections of businesses, assets and liabilities attributed to them, no group is a separate legal entity and therefore cannot own assets, issue securities or enter into legally binding agreements. Holders of tracking stock have no direct claim to the group's stock or assets and are not represented by separate boards of directors. Instead, holders of tracking stock are stockholders of the parent corporation, with a single board of directors and subject to all of the risks and liabilities of the parent corporation.

The term 鈥淨VC Group鈥� does not represent a separate legal entity, rather it represents those businesses, assets and liabilities that have been attributed to that group. As of September听30, 2017, the QVC Group is primarily comprised of our merchandise-focused televised-shopping programs, Internet and mobile application businesses and has attributed to it our wholly-owned subsidiaries, QVC and zulily, llc (鈥渮ulily鈥�), our approximate 38% interest in HSN, Inc. (鈥淗SN鈥�), and cash and cash equivalents of approximately $383 million, which includes subsidiary cash. The QVC Group also has attributed to it liabilities that reside with QVC and zulily, certain liabilities related to our corporate level indebtedness (see note 10) and certain deferred tax liabilities.

On July 6, 2017, Liberty announced that it had entered into an Agreement and Plan of Merger, dated as of July 5, 2017 (the 鈥淗SN Merger Agreement鈥�), by and among Liberty, Liberty Horizon, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Liberty (鈥淢erger Sub鈥�), and HSN. Pursuant to the terms of the HSN Merger Agreement, Merger Sub will merge with and into HSN, with HSN surviving as a wholly-owned subsidiary of Liberty (the 鈥淗SN Merger鈥�). As a result of the HSN Merger, Liberty will acquire the approximately 62% of HSN it does not already own in an all-stock transaction making HSN a wholly-owned subsidiary, attributed to the QVC Group tracking stock group. Liberty currently owns approximately 38% of HSN. HSN shareholders (other than Liberty) will receive fixed consideration of 1.65 shares of Series A QVC Group common stock for each share of HSN common stock. Based on the Series A QVC Group common stock鈥檚 closing price as of July 5, 2017 and the number of HSN undiluted shares outstanding as of May 1, 2017, this equates to a total enterprise value for HSN of $2.6 billion, an equity value of $2.1 billion, and consideration of $40.36 per HSN share, representing a premium of approximately 29% to HSN shareholders, based on HSN鈥檚 closing price on July 5, 2017. Liberty intends to issue 53.4 million shares of Series A QVC Group common stock to HSN shareholders.

The HSN Merger is expected to be completed by the fourth quarter of 2017.听 The completion of the acquisition is subject to certain customary conditions, including听approval by a majority of the outstanding voting power of HSN shareholders.听A voting agreement has been obtained from Liberty to vote its HSN shares in-favor of the transaction.听 Approval of the Liberty stockholders is not required, and is not being sought, for the HSN Merger.听 Upon closing, Liberty鈥檚 board of directors will be expanded by one to include a director from HSN鈥檚 board of directors; this director will be selected by Liberty.

The term 鈥淰entures Group鈥� does not represent a separate legal entity, rather it represents those businesses, assets and liabilities that have been attributed to that group. As of September听30, 2017, the Ventures Group is comprised primarily of our interests in Evite, Inc. (鈥淓vite鈥�), FTD Companies, Inc. (鈥淔TD鈥�), LendingTree, Inc. (鈥淟endingTree鈥�), Liberty Broadband, investments in Charter, ILG, Inc. (鈥淚LG鈥�), and Time Warner Inc. (鈥淭ime Warner鈥�), and cash and cash equivalents of approximately $512 million. The Ventures Group also has attributed to it certain liabilities related to our Exchangeable Debentures (see note 10) and certain deferred tax liabilities. The Ventures Group is primarily focused on the maximization of the value of these investments and investing in new business opportunities.听

On April听4, 2017, Liberty entered into an Agreement and Plan of Reorganization (the 鈥淕CI Reorganization Agreement鈥� and the transactions contemplated thereby, the 鈥淭ransactions鈥�) with General Communication,听Inc. (鈥淕CI鈥�), an Alaska corporation, and Liberty Interactive LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Liberty (鈥淟I LLC鈥�), whereby Liberty will acquire GCI through a reorganization in which certain Ventures Group assets and liabilities will be contributed to GCI in exchange for a controlling interest in GCI.听听Liberty and LI LLC will contribute to GCI Liberty (as defined below) its entire equity interest in Liberty Broadband and Charter, along with, subject to certain exceptions, Liberty鈥檚 entire equity interests in FTD and LendingTree, together with the Evite operating business and certain other assets and liabilities, in exchange for (a)听the issuance to LI LLC of (i)听a number of shares of reclassified GCI Class听A Common Stock and a number of shares of reclassified GCI Class听B Common Stock equal to the number of outstanding shares of Series听A Liberty Ventures common stock and Series听B Liberty Ventures common stock outstanding on the closing date of the Contribution, respectively, and (ii)听cash and (b)听the assumption of certain liabilities by GCI Liberty (the 鈥淐ontribution鈥�).

Liberty will then effect a tax-free separation of its controlling interest in the combined company (to be named GCI Liberty,听Inc. (鈥淕CI Liberty鈥�)) to the holders of Liberty Ventures common stock in full redemption of all outstanding shares of such stock, leaving QVC Group common stock as the only outstanding common stock of Liberty.听 Holders of GCI Class听A Common Stock and GCI Class听B Common Stock each will receive (i) 0.63 of a share of reclassified GCI Class A Common Stock and (ii) 0.20 of a share of new GCI Series A preferred stock in exchange for each share of their existing GCI stock.听听听The exchange ratios were determined based on total consideration of $32.50 per share for existing GCI common stock, comprised of $27.50 per share in reclassified GCI Class听A Common Stock and $5.00 per share in newly issued GCI Preferred Stock, and a Liberty Ventures reference price of $43.65 (with no additional premium paid for shares of GCI Class听B Common Stock). The Series A preferred shares will accrue dividends at an initial rate of 5% per annum (which would increase to 7% in connection with a future reincorporation of GCI Liberty in Delaware) and will be redeemable upon the 21st anniversary of the closing.

At the closing of the Transactions, Liberty will reattribute certain assets and liabilities from the Ventures Group to the QVC Group (the 鈥淩eattribution鈥�).听 The reattributed assets and liabilities, if effected as of the date hereof, would include cash, Liberty鈥檚 interest in ILG, certain green energy investments, LI LLC鈥檚 exchangeable debentures, and certain tax benefits. Pursuant to a recent amendment to the reorganization agreement, LI LLC鈥檚 1.75% Exchangeable Debentures due 2046 (the 鈥�1.75% Exchangeable Debentures鈥�) will not be subject to a pre-closing exchange offer and will instead be reattributed to the QVC Group, along with (i) an amount of cash equal to the net present value of the adjusted principal amount of such 1.75% Exchangeable Debentures (determined as if paid on October 5, 2023) and stated interest payments on the 1.75% Exchangeable Debentures to October 5, 2023 and (ii) an indemnity obligation from GCI Liberty with respect to any payments made by LI LLC in excess of stated principal and interest to any holder that exercises its exchange right under the terms of the debentures through October 5, 2023. The cash reattributed to the QVC Group will be funded by available cash attributed to Liberty鈥檚 Ventures Group and the proceeds of a margin loan facility in an initial principal amount of up to $1 billion.听听Within six months of the closing, Liberty, LI LLC and GCI Liberty will cooperate with, and reasonably assist each other with respect to, the commencement and consummation of a purchase offer (the 鈥�Purchase Offer鈥�) whereby LI LLC will offer to purchase, either pursuant to privately negotiated transactions or a tender offer, the 1.75% Exchangeable Debentures on terms and conditions (including maximum offer price) reasonably acceptable to GCI Liberty. GCI Liberty will indemnify LI LLC for each 1.75% Exchangeable Debenture repurchased by LI LLC in the Purchase Offer in an amount equal to the difference between (x) the purchase price paid by LI LLC to acquire such 1.75% Exchangeable Debenture in the Purchase Offer and (y) the sum of the amount of cash reattributed with respect to such purchased 1.75% Exchangeable Debenture in the reattribution plus the amount of certain tax benefits attributable to such 1.75% Exchangeable Debenture so purchased. GCI Liberty鈥檚 indemnity obligation with respect to payments made upon a holder鈥檚 exercise of its exchange right will be eliminated as to any 1.75% Exchangeable Debentures purchased in the Purchase Offer.

Liberty will complete the Reattribution using similar valuation methodologies to those used in connection with its previous reattributions, including taking into account the advice of its financial advisor. The Transactions are expected to be consummated during the first quarter of 2018, subject to the satisfaction of customary closing conditions and the requisite stockholder approvals.听Simultaneous with that closing, QVC Group, including wholly-owned subsidiaries QVC,听Inc., zulily and HSN (or, if the HSN Merger has not yet closed, following such closing), will become an asset-backed stock and Liberty will be renamed QVC Group,听Inc.听 Neither the Transactions nor the HSN Merger is conditioned on the completion of the other, and no assurance can be given as to which of these transactions will be completed first.

See Exhibit听99.1 to this Quarterly Report on Form听10-Q for unaudited attributed financial information for Liberty's tracking stock groups.