Liberty Media Corporation has made a proposal to Sirius XM Holdings Inc. that outlines the terms by which Sirius public shareholders would become shareholders of Liberty in a tax-free transaction in which each share of Sirius common stock would be converted into 0.0760 of a new share of Liberty Series C common stock, and, immediately prior to such conversion, Liberty intends to distribute, on a 2:1 basis, shares of Liberty’s Series C common stock to all holders of record of Liberty’s Series A and B common stock to create a liquid trading market for Liberty’s Series C common stock.
Upon the completion of the proposed transaction, Liberty expects that Sirius’ public shareholders would own approximately 39% of Liberty’s then-outstanding common stock.
“Our proposal will allow Sirius public shareholders to convert from a non-controlling stake in a subsidiary into a direct equity position in Liberty, the parent company,” said Greg Maffei, Liberty CEO. “Sirius shareholders will continue to participate in Sirius’ future prospects along with Liberty’s broader portfolio of businesses and opportunities. We believe the combined company will have better access to capital and all of Liberty’s shareholders — both its current shareholders and the Sirius shareholders who become Liberty shareholders as a result of the proposed transaction — will enjoy enhanced liquidity as shareholders of a $27 billion market capitalization company.”
“The proposed transaction is an important step in the growth of both companies,” said John Malone, Liberty’s Chairman. “It will enable us to focus our energies on the pursuit of new opportunities across the expanded portfolio of Liberty’s businesses and to optimize our capital structure to produce the maximum possible returns to all shareholders.”
The Series C common stock would be Liberty’s largest and most liquid series of stock. The proposed exchange ratio of 0.0760 would value Sirius common shares at approximately $3.68 per share based on closing prices of Liberty’s Series A shares on 1/3. This exchange ratio represents a 4.5% premium to the exchange ratio implied by the closing prices of Liberty’s Series A and Sirius’ shares on 1/2 and a 3.1% premium to the exchange ratio implied by the closing share prices of 1/3.
As explained in the proposal letter sent to Sirius, which will be filed promptly with the SEC, the proposed transaction would be subject to the negotiation and execution of mutually acceptable definitive transaction documents, the terms of which would be approved by a special committee of independent directors of Sirius, and would also be subject to a majority of the minority vote of the Sirius public shareholders. The approval by the Liberty shareholders of the issuance of the Series C common shares in the proposed transaction would also be required under applicable Nasdaq Stock Market requirements. Other than applicable filings with the SEC, Liberty does not anticipate that any additional regulatory approvals would be required.
RBR-TVBR observation: The move follows SiriusXM agreeing last October to repurchase $500 million in Liberty Media common stock. The effort was part of Sirius’ share repurchase program, which it announced has been increased by an additional $2 billion at the time. Liberty Media said expects to continue to own over 52% of the outstanding SIRI shares after giving effect to the repurchase. In effect, Sirius XM spent some of its capital to return some of the Liberty investment made in SiriusXM over the past few years in its gradual takeover of the company. Now is a good time to merge the two stocks to give Liberty even deeper pockets for future transactional growth.
