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Sirius Moves Closer to Being Bought (Update 2)

(Updated to add tweet about net operating loss and analysis in the eighth and ninth paragraphs.)

NEW YORK ( TheStreet) -- Sirius (SIRI - Get Report) has been a battleground stock seemingly forever, but as the company has improved its cash position, the rumblings that it could be acquired grow ever louder.

John Malone and Liberty Media (LMCA - Get Report) could be the ones to do it, according to a Citigroup analyst.

Analyst Jason Bazinet says Liberty may potentially double its stake to 80%. Bazinet believes this could create an additional $930 million in value by tapping into Sirius' significant tax assets. Bazinet rates Sirius "buy" with a $2.50 price target and Liberty Media "neutral" with a $94 target.

This comes as several major hedge funds reduced their stakes in Sirius during the fourth quarter. Funds like SAC Capital Advisors, JAT Capital and George Soros reduced or cut their stakes.

Sirius is now free-cash-flow positive and just recently raised monthly subscription prices for the first time in the company's history.

Barrington Research analyst James Gross calls Sirius' free-cash-flow growth "impressive," saying it "should provide a meaningful catalyst for share-price gains. ...," Gross wrote in his Feb. 13 research note. He rates shares "outperform" with a $3 price target.

Bazinet says an 80% ownership stake by Liberty could cause free cash flow to "ramp significantly over the next four years," as well as "pave the way for Sirius to use its cash flow to retire the remaining 20% of public float over next four years."

Shares of Sirius are up 24.2% this year, while shares of Liberty Media have risen 15.4%.

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