The decision comes nearly five years after Liberty Media -- chaired byJohn Malone -- took a 40% stake in SiriusXM through a lifesaving $530 million capital infusion into the satellite radio leader. Over subsequent years, Liberty Media has increased its holding in SiriusXM as the company rebounded from the verge of bankruptcy, became profitable and generated positive cash flows. Nearly a year ago, Liberty Media built its stock ownership of SiriusXM to a controlling interest.
Now the media giant is seeking to consolidate the SiriusXM into its own finances as a wholly owned subsidiary.
The company said in a Friday press release that it would seek to convert public shares of SiriusXM into Liberty Media shares. Were a deal to be done on the terms that Liberty Media announced on Friday, current SiriusXM shareholders would own approximately 39% of Liberty Media's outstanding stock. The combined company would have a stock market capitalization of $27 billion, Liberty Media said.
Friday's deal values SiriusXM shares at $3.68 apiece, according to a press release, a modest premium to Thursday closing share prices.
Liberty Media rejected analyst assertions that consolidating SiriusXM would curb the firm's share repurchase activity. Instead of SiriusXM buying back shares, the commentary indicated Liberty would simply pick up such activity. "The Sirius buyback program becomes the Liberty buyback program," the company said on a call with analysts.
With Liberty's stock deal on the table for SiriusXM minority shareholders, the satellite radio giant will need to form a special committee to evaluate the $3.68 a share consolidation proposal. Liberty also indicated they would be flexible to negotiation once the special committee forms an opinion on their offer.
An acquisition of SiriusXM and the subsequent boost of Liberty Media's market capitalization to $27 billion could also aid the company in pushing a joint bid with Charter Communications (CHTR) in buying Time Warner Cable (TWC). Liberty Media characterized Friday's proposal as a means to give the company added financial and strategic flexibility. Liberty Media openly fielded questions about Charter Communications and Time Warner Cable in their call announcing their SiriusXM proposal. On Friday, Evercore Partners upgraded SiriusXM shares to "outperform," with a $4.50 price target, citing the company's efforts to profit from a growing marketplace for wireless connectivity within automobiles. SiriusXM Upgraded by Evercore on Connected Car Opportunity
-- Written by Antoine Gara in New York