Sirius XM Canada Holdings has confirmed it has received a takeover approach following a report that the satellite radio provider’s owners plan to take it private. One analyst has already said the suggested C$4.25 per share price might be difficult for minority investors to swallow.
Sirius XM Canada Holdings (TSX:XSR) has confirmed it has received a takeover approach following a report that the satellite radio provider’s owners plan to take it private.
The company disclosed it had been “approached on a preliminary basis regarding a potential corporate transaction”, and was “in early stage discussions as to the viability” of such a transaction.
Existing investors – led by US affiliate Sirius XM Holdings (NASDAQ:SIRI) – are preparing a C$4.25 cash offer to buy the ~30% of Sirius XM Canada shares that float on the TSX, valuing the target at C$750m (US$540m), according to a source cited by The Globe and Mail.
Shares in Sirius XM Canada closed at C$4.26 on Friday, the day it confirmed the approach, up 15.76% from its previous closing price of C$3.68 and above the touted offer price.
RBC Capital Markets analyst Haran Posner suggested the reported offer price of C$4.25 could face opposition from minority shareholders, and noted it was below his bank’s price target of C$5.
Price targets for Sirius XM Canada stock from Bay Street analysts range from C$4.25 to C$6.50, with the mean at C$4.96.
“A C$4.25 takeout bid seems opportunistic to us given the recent decline in the share price and potential savings/synergies in a privatisation involving Sirius XM (public company costs, subscriber/billings systems, duplicate management positions, etc.),” said Posner.
“We do believe that privatisation could be a “clean” way to address lingering overhangs for the stock (Sirius XM contract renewals, large insider ownership), but we would expect resistance from public shareholders to a C$4.25 cash bid.”
According to a recent Sedar filing, Sirius XM owns 36.8% of Sirius XM Canada’s class A shares, assuming its class B and C shares were converted, and 24.87% of its voting rights, making it the Toronto-based company’s largest shareholder. The New York satellite broadcaster’s shares rose 2.37% following Sirius XM Canada’s confirmation of an approach. Sirius XM declined to comment on the report.
Sirius XM Canada’s three other main investors are all Canadian, and took their stakes after Sirius Canada and XM Canada agreed to merge in 2010.
Media firm Slaight, serial investor John Bitove’s Obelysk and national broadcaster CBC own 12.33%, 10.09% and 10.15% of the class A shares respectively, and 19.32%, 17.09%, and 9.64% of the respective voting rights.
Sirius and XM were once the two main satellite radio services in North America. In the US the two broadcasters agreed a US$13bn merger in February 2007 and, following FCC and Department of Justice reviews that took more than 12 months, completed their tie-up in March 2008. A similar agreement in Canada would not happen for another two and a half years as the two companies disagreed about how the ownership of the company should be split, with debt, content rights and listening figures all part of the conversation.
In December 2010 Sirius Canada and XM Canada reached a definitive agreement to combine in an all-stock merger of equals with an aggregate enterprise value of approximately C$520m (US$516m), including C$130m (US$129m) of debt.