The quixotic John Malone-chaired cable and media conglomerate has stakes not only in Sirius, but also in
Barnes & Noble
(BKS - Get Report)
(LYV - Get Report)
, and has never been shy about tax-advantaged acquisitions. Sirius is certainly that, as it has net operating losses (NOL) and will not have to pay taxes for the foreseeable future.
the NOL would be "very advantageous to prospective buyers."
Liberty Media has historically spun out its investments, having done so with
and others, but that may not be the case this time.
Malone's style prompted Warren Buffett-run
(BRK.A - Get Report)
to recently acquire a
stake in Liberty Media
. Several hedge funds, including
Tiger Global Management
Och Ziff Capital Management
and David Einhorn-run
Greenlight Capital Management
also have positions.
(See the rest of
Bazinet writes in his research note that Liberty Media has access to $6.5 billion in liquidity from three sources: "1) $3.85 billion from Liberty Media cash on hand, existing Sirius debt, existing lines of credit and FCF in 2012; 2) $1.4 billion from Sirius cash on hand and FCF in 2012; and 3) $1.25 billion in cash from Liberty Ventures." Purchasing an 80% stake of Sirius at $2.50 per share would cost $6.36 billion, so Liberty Media has the means to do it.
Bazinet is not the only analyst who says a merger or takeover is likely. In a Feb. 9 report, Pivotal Research Group analyst Jeffrey Wlodarczak increased his price target for Liberty Media to $107 a share, driven by an increase in the value of Sirius XM Radio.
"We continue to believe Liberty inevitably increases its stake in SIRI above 50% prior to an inevitable merger," wrote Wlodarczak, who noted that by clawing back
, the company now has up to $9 billion that it can use for share buybacks or acquisitions of investments like Sirius and LiveNation.
The signs for a potential Sirius merger are there, with more than one analyst forecasting an inevitable merger. Whether it happens is in Malone's hands, but the groundwork has been laid.
Shares of Sirius are higher today, up 1.35% to $2.25.
For more on M&A, see
5 deal ready stocks loved by hedge funds
-- Written by Chris Ciaccia and Antoine Gara in New York
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