There is increasing speculation surrounding the future of SiriusXM, as the US satellite radio provider seeks to block an attempt by minority shareholder Liberty Media to take de facto control of the group.
SiriusXM’s shares have jumped 8.6% since…
There is increasing speculation surrounding the future of SiriusXM, as the US satellite radio provider seeks to block an attempt by minority shareholder Liberty Media to take de facto control of the group.
SiriusXM’s shares have jumped 8.6% since it filed a petition on 30 March to the FCC to dismiss or deny Liberty’s request for control, as reports suggest the satellite radio firm could soon be in play. The shares closed at US$2.40 on 02 April, up from an average of around US$2.26 for March.
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. This stake is now worth a reported US$6bn, following SiriusXM’s rise to profitability that has helped to boost its shares from a US$0.07 low in February 2009.
But 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. In what would appear to show that Liberty is already looking to take a controlling share following the expiration of the lock-up, the group 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.
Liberty, which is headed by renowned media mogul John Malone, has not disclosed any plan to increase its share of SiriusXM. However, this has not stopped reports from speculating that Malone’s next move would likely be to increase his share to a controlling 51% stake, and then spinning this holding off to avoid heft tax bills.
In any case, SiriusXM’s call on the FCC to throw out Liberty’s request for de facto control shows it is not willing to give Malone such an easy ride.
In its petition to the FCC, SiriusXM claimed: “The Investment Agreement was carefully negotiated to ensure that Liberty would not be in control of SiriusXM and would not gain control upon the expiration of the Investment Agreement Provisions. The expiration of the Investment Agreement Provisions does no more than remove certain barriers to Liberty’s ability to take additional steps to acquire control of SiriusXM, should it decide to take those steps.”
The petition also pointed to how Liberty currently has control of only five of SiriusXM’s 13 board members – of which two are independent to Liberty and neither are the CEO or chairman. Further still, SiriusXM claimed it demonstrated Liberty’s current lack of control of the group by refusing to provide it with passwords that were required to make its request for de facto control to the FCC electronically in the first place.
Notably, Liberty was at first considered as SiriusXM’s White Knight when it came to the rescue back in 2009. In so doing, the group even managed to curtail the loan-to-own strategy of satellite operator Echostar, which had purchased around US$375m of SiriusXM’s total US$3.2bn debt burden in order to put in a strong bargaining position for total control of the group.
