Sirius XM Can't Shake Free of Liberty

By Rick Aristotle Munarriz | More Articles May 31, 2012 |

Liberty Media (Nasdaq: LMCA) has sunk its fangs into Sirius XM Radio (Nasdaq: SIRI) , and it's really just a matter of time before the digestion process begins.

As expected, Liberty Media is once again trying to take de facto control of the satellite radio operator. A fresh 13D SEC filing petitions regulators to once again consider the proposal.

What has changed since being rebuffed on May 4 for Liberty Media? Well, through a few transactions the company has beefed up its stake from a simply 40% preferred share position to an effective 46.2% stake. Liberty Media now has effective control of nearly 3 billion of Sirius XM's 6.5 billion shares outstanding. Is the FCC really going to make it jump through the final few hoops? There's a big difference between simply having the 40% preferred share stake that is has held for more than three years and making active moves to own more shares.

The filing details that Sirius XM plans to convert nearly half of its preferred stake into common stock and move to take a majority of the company's board seats.

It's at that point where investors and analysts alike can speculate on what Liberty Media will do with FCC-sanctioned control of the satellite radio giant, though a popular suggestion is that it will follow in the 2009 footsteps of what it did with DIRECTV (Nasdaq: DTV) . Through a Reverse Morris Trust transaction, Liberty Media would be able to spin out the business in a tax-advantaged manner.

This is obviously not the kind of news that Sirius XM investors were hoping to hear when they thought that Liberty Media would have to pay a juicy premium to take control of Sirius XM. However, there are no indications that Liberty Media wants to replace the company's leadership or disrupt the media heavyweight's trajectory. As Sirius XM's largest investor -- by far -- its best interests are aligned with shareholders.

Sirius XM was never about scoring a near-term pop, no matter what you hear on Channel 2 (the pop music-driven Sirius XM Hits 1 channel).

Running of the bullsI remain bullish on Sirius XM's future. It should come as no surprise that I'm promoting the CAPScall initiative for accountability by reiterating my bullish call on Sirius XM for Motley Fool CAPS.

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Sirius XM Can't Shake Free of Liberty