Despite the FCC’s dismissal of Liberty Media’s request for control of SiriusXM, the media giant has announced plans to spend approximately US$650m over the next six months to increase its stake in the satellite radio provider to 45.2%.
As part of…
Despite the FCC’s dismissal of Liberty Media’s request for control of SiriusXM, the media giant has announced plans to spend approximately US$650m over the next six months to increase its stake in the satellite radio provider to 45.2%.
As part of Liberty’s first quarter 2012 results conference call, president and CEO Greg Maffei outlined the company’s share purchase plan as well as its intention to appeal the FCC decision. Maffei said: “Last Friday, our application for de facto control of SiriusXM was dismissed by the FCC. We have 30 days to file a motion to reconsider which we plan to do and we are looking at our options with regard to our stock and with regard to that application.
“Furthermore, we have entered in a forward purchase contract covering 302 million shares of SiriusXM’s common stock. The forward price is set at US$2.15 with the total all-in cost to Liberty Media of US$650m plus some funding costs. Physical settlement, if we choose to do so, would increase Liberty’s ownership to 45.2% on an as converted basis, i.e. treating our preferred stock as converted into common. The forward is scheduled to close early in the third quarter.”
Subsequent to that annoucement, an SEC filing revealed that Liberty purchased just over 60 million SiriusXM shares in two transactions on the 8 and 9 May. The filing also stated that the forward purchase contract is being undertaken with an unnamed unaffiliated counterparty that has already purchased some or all of the shares as part of a hedge. Under the forward contract, the expiration date for Liberty to acquire the shares from the counterparty is 6 July 2012.
As to why Liberty has chosen to increase its stake to just over 45%, Maffei said: “I think we constructed this forward on incremental shares both because we thought it was attractive financially and because we thought it increased some of our options around what the ultimate relationship with SiriusXM is.”
Regarding the FCC decision, Maffei added: “As far as de facto control, my layman’s understanding would be we have a certain series of rights under the contract (part of the investment agreement signed in 2009) with SiriusXM. To be able to fully exercise those rights freely we need to have de facto control approved by the FCC and that’s why we went in effect to pre-clear some of that. As far as changing our application, I think, there are host of actions we might take including this action we have taken which will have bearing on our application and we will weigh those as we said over the next 30 days and decide how to amend.”
Since February 2009, Liberty has owned preferred stock that is convertible into an approximate 40% minority equity stake in SiriusXM, as part of a US$530m financing package that prevented the group from defaulting on its debt. Until 6 March 2012, Liberty had been subject to a 3-year lock-up that prevented it from taking a stake of more than 49.9% without triggering takeover obligations. Following the expiration of the lock-up, Liberty submitted a request to the FCC on 20 March to assume de facto control, which could allow it to increase its board representation and up its stake more easily.
