Liberty Media may be launching hostile takeover of Sirius XM
John Malone’s Liberty Media his filed three Form 312s with the FCC seeking consent to the transfer of de facto control of SiriusXM Radio’s earth station licenses and seeking consent to the transfer of control of Sirius XM Radio ‘s SDARS terrestrial repeater authorization. Obviously, they appear to request control of Sirius XM be transferred to Liberty.
SiriusXM’s response, via attorney Richard Wiley of Wiley Rein, LLP in DC noted that Liberty’s filing was late and that they intend to file a formal response to the FCC requesting denial of the applications.
See the response here: FCC Letter – 3-22-20
The move appears to be a hostile action. Liberty has moved on some provision or wording within the 2009 Investment Agreement or on precedents set by past transfers of de facto control under 50% ownership, and used this to attempt to take control of Sirius XM without having to obtain over 50% of the company.
Back in November, Liberty was considering doubling down on Sirius XM after saving it from the brink of bankruptcy two years ago. The company was having discussions about adding to its sizable stake in Sirius. As part of a deal to lend Sirius up to $530 million, Liberty acquired 40% stake in Sirius (voting preferred shares) in March 2009. Liberty has 12.5 million preferred shares.
The investment has so far had a great ROI, with Liberty earning 15% on most of the loans it made to Sirius and, as a bonus, got a big stake in the company.
If Sirius does a stock buyback this year, a prospect that is seen as increasingly likely, then Liberty’s ownership would also rise unless Sirius is allowed to buy back a portion of its shares held by Liberty.
When we wrote the story in November, Liberty at that time could increase its Sirius stake to 49%, giving it effectively a controlling interest, but there are tax implications and other disadvantages to doing so. “After March 2012, however, those issues disappear, making it easier for Liberty to up its stake.”
If Liberty is able to obtain de facto control, do they use Sirius XM’s cash position to repurchase shares and increase their stake? That’s what Stephen Falukner of investor site Seeking Alpha thinks.
RBR-TVBR observation: It appears the white knight who saved SiriusXM from bankruptcy has turned into a hostile gladiator. Look for some spirited legal battling to ensue.