Liberty Moving Toward Sirius Control

Mike Farrell -- Multichannel News, 5/31/2012 6:19:50 PM

Sirius XM Radio continued to try to stave off Liberty Media chairman John Malone's advances, stating in Securities and Exchange Commission filings that it is in discussions with the media giant to work out a deal that would be mutually beneficial to all shareholders. Liberty has been trying to gain control of Sirius since March, when it filed a petition with the Federal Communications Commission to gain de facto control of its satellite assets. While those efforts were rejected by the FCC on May 4, Liberty vowed to refile its petition. Liberty made good on that promise Thursday, outlining a path to control of Sirius that would include converting half of the preferred stock it owns in Sirius to common stock, giving it 32% of Sirius' outstanding shares. The media giant said in an SEC filing Thursday that it would move quickly to gain control of Sirius' board of directors by nominating a majority of its directors. Liberty, which owns preferred stock convertible into about 46% of Sirius' outstanding shares, currently can nominate five of its 13-member board. Sirius countered in its own SEC filing that such nominations could require a special meeting of shareholders, which can only be called by two or more directors or the company CEO. To date no such request has been made to Sirius. Sirius said in SEC documents that it is in discussions with Liberty "to explore possible transactions with respect to its ownership interest in Sirius, although we have not reached agreement with respect to a specific transaction that would be mutually beneficial to both our common and preferred stockholders." Sirius stressed there is no guarantee that such an agreement could be reached and added that any developments from those discussions were not expected to be disclosed. The most recent moves are a culmination in what has been a contentious battle between Liberty and Sirius CEO Mel Karmazin, who told shareholders at Sirius' annual meeting last week that he could not stop Liberty from buying shares on the open market, but hoped that they would pay a premium for control. Liberty may not have to, according to one analyst. In a research note Thursday, Canaccord Genuity media analyst Tom Eagan said he expected Liberty to buy Sirius shares on the open market. "Contrary to what many on the Street expect, we do not believe that Liberty needs FCC approval to take control of Sirius," Eagan wrote. "We believe they need to merely inform the FCC if they intend, for example, to increase their stake to above 51% (from 46.2% as of the last filing). Or Liberty could negotiate with the board to take control with, say 49.9%."

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Liberty Moving Toward Sirius Control