Liberty Tells U.S. It Wants to Take Control of Sirius XM Radio

By Todd Shields and Alex Sherman - 2012-06-01T04:01:00Z

John Malones Liberty Media Corp. (LMCA), the holder of interests in businesses ranging from cable programmer Starz LLC to the Atlanta Braves baseball team, told U.S. regulators it wants to take over Sirius XM Radio Inc.

Liberty plans to assert control of the largest U.S. satellite radio provider after receiving approval from the Federal Communications Commission, the Englewood, Colorado-based company said in a filing yesterday. Liberty has asked the FCC to reconsider the agencys May 4 dismissal of its application for permission to take control, according to a filing with the Securities and Exchange Commission.

Libertys move has fueled speculation Malone wants to spin off his stake in New York-based Sirius, led by Chief Executive Officer Mel Karmazin. Liberty will probably execute a so-called Reverse Morris Trust, which involves splitting off its Sirius (SIRI) stake as a separate entity and giving its stockholders the option to hold or sell their Sirius shares, according to James Ratcliffe, an analyst at Barclays Capital Inc. in New York.

To execute the spinoff, Liberty must have Siriuss board approval. Sirius is in talks with Liberty about the companys ownership interest, according to a separate filing by Sirius. It said Sirius doesnt expect to disclose developments in the discussions.

Courtnee Ulrich, a Liberty spokeswoman, didnt respond to a telephone call and e-mail. Patrick Reilly, a Sirius spokesman, declined to comment.

Malone, Libertys chairman, saved Sirius from bankruptcy in 2009 with a $530 million loan. Liberty boosted its stake in Sirius to 46.2 percent from 40 percent last month.

Libertys interest in a Reverse Morris Trust is to save on capital gains taxes, said analyst Brett Harriss, a Gabelli & Co. analyst in Rye, New York. Distributing Sirius shares to Liberty stockholders through a spinoff instead of selling them on the open market lets the company avoid paying taxes on the sale, he said.

Liberty would also have the right to change management at the company if it gains control of the board. Malone may not want to remove Karmazin, who helped turn around the company since taking over in 2008, said Harriss, who has a hold rating on Sirius shares.

All the comments that Liberty has made toward Mel have been positive, and Mels done a good job increasing the companys profitability, Harriss said in an interview. That being said, I could see a situation where there could be conflicting personalities. These are two high-powered guys in Mel and John.

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Liberty Tells U.S. It Wants to Take Control of Sirius XM Radio