Liberty Media has moved closer to taking control of SiriusXM after upping its stake to 48% and filing an application with the FCC to take ‘de jure’ control of the satellite radio provider.
In its application, Liberty Media stated that it “intends…
Liberty Media has moved closer to taking control of SiriusXM after upping its stake to 48% and filing an application with the FCC to take ‘de jure’ control of the satellite radio provider.
In its application, Liberty Media stated that it “intends to purchase sufficient additional shares of Sirius common stock such that, upon conversion of its Preferred Shares, it will own more than 50% of the total outstanding shares of Sirius, giving it de jure control of Sirius including the ability to control the membership of the Sirius Board of Directors.”
Between 10 and 16 August, Liberty acquired an aggregate of 94.3 million shares of SiriusXM common stock in open market purchases increasing its stake from 46.2% to 48.1%. However, Liberty stated that it would not convert its preferred shares nor make fresh share purchases until the FCC grants its application.
The US communications regulator previously dismissed the company’s request for ‘de facto’ control of SiriusXM back in March 2012 arguing that such applications “are defective with respect to ‘execution’ and ‘other matters of a formal character.’” Specifically, Liberty Media was unable to obtain the passwords, signatures, and other necessary information from SiriusXM to properly file an electronic transfer of control application.
One industry analyst told SatelliteFinance that with ‘de jure’ control this is unlikely to be an issue and that the FCC was widely expected to approve the application.
The analyst did point out, though, that Liberty has based its ability to own more than 50% of SiriusXM on the conversion of all of its preferred shares. A portion of this is held through its ownership of US$11m of 7% convertible SiriusXM notes, which would convert into approximately 5.87 million SiriusXM shares. A potential problem might arise if the holders of the remaining 7% notes converted their debt, as they would take control of approximately 287 million shares and thus diluted Liberty’s stake.
That being so, these creditors have done nothing to suggest they would seek to do so.
However, some of Sirius XM’s existing shareholders have moved to show their displeasure at the takeover plan. Following Liberty’s FCC filing, the City of Miami (Florida) Police Relief and Pension Fund filed a lawsuit in chancery court of Delaware against Sirius XM’s board of directors. The complaint alleges that the provisions that prevent the Sirius board from taking any action to block Liberty taking control of the company breach its fiduciary duties to the minority shareholders.
So far the case has not proved too successful with Delaware Judge Leo Strine ruling on 23 August against the plaintiff’s request to stop Liberty from purchasing any further Sirius XM shares.
Assuming the FCC approved the transfer of control, Liberty is likely to push for further financings and share buybacks from SiriusXM before the end of the year.
Liberty CEO Greg Maffei recently told analysts that he believed SiriusXM is currently underleveraged and that there was to raise debt and return capital to shareholders. He also suggested that any tax-free spin off of its holding in the satellite radio provider would be put on hold until after such financings had taken place.
