Liberty has proposed a takeover of Sirius XM at a tiny takeover premium. Here’s what I think:
- Malone probably wants to do this move because Sirius shares are more undervalued than Liberty shares. I may have goofed here because I did not notice this. This may have something to do with Sirius’ new CEO (Jim Meyer) and Sirius’ recent purchase of Agero. It looks like Malone is intrigued by the potential of the connected car. I think he is also happy with the new CEO’s skill and the fact that Sirius is now going in the direction he wanted.
- Some of the business stakes owned by Liberty Media aren’t quite as good as Sirius XM. Barnes and Noble has been faltering as it looks like the Nook will eventually die (executives are leaving and sales have been disappointing). In my opinion Live Nation is not a good a business as Sirius.
- The Sirius shareholders will receive class C shares of Liberty Media, which will have no voting rights. This is a classic Malone move as Malone is all about control.
- Liberty and Sirius have a deal whereby Liberty will be selling Sirius shares to Sirius. If the takeover succeeds, then Liberty will avoid some tax leakage as it will do something other than selling the shares outright and triggering the tax on Liberty’s Sirius shares. If the takeover fails, then Sirius stock may trade at a higher price than it otherwise would; Liberty will at least get to sell its Sirius shares at a higher price.
- The tiny takeover premium suggests that Malone is very price-conscious.
- Malone might be hoping that Sirius and Liberty will trade at discounts after the merger so that he can buy back more shares at attractive prices. He can play games to make Sirius unattractive. I have always found Liberty’s financials to be extremely unusual and difficult to understand. I think that this is intentional on Malone’s part.
Sirius’ 425 filings are worth reading. BamSEC is a good website that presents SEC filings in an easier to access format.
*Disclosure: Long LMCA common stock, no position in SIRI.