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Analyst: Liberty May Fund Cable Buy Using Sirius XM Stake

john malone, liberty media

Chairman of Liberty Media John Malone attends the Allen & Co Media Conference in Sun Valley, Idaho, in 2012. (REUTERS)

Liberty Media (LMCA), which reportedly has been eyeing cable targets for Charter Communications (CHTR), could get funds for such an acquisition by selling a portion of its stake in Sirius XM (SIRI), analysts at Macquarie Capital said.

In a research note sent to clients on Thursday, analysts Amy Yong and Andrew DeGasperi also raised their price target for Liberty Media to $155 from $150.

Liberty Media Chairman John Malone is said to be looking into ways Charter, the fourth-largest U.S. cable provider, can acquire a rival cable company like Time Warner Cable (TWC) or Cablevision (CVC).

Charter has gone as far as hiring Goldman Sachs to pursue a bid for Time Warner Cable, which rejected initial takeover overtures from Malone.

In March, Liberty Media announced a deal to acquire a 27.3% stake in Charter. Earlier this year, Charter agreed to buy Cablevision’s western U.S. cable systems, Optimum West, for roughly $1.6 billion in cash.

The Macquarie analysts said they expect Liberty Media to consider using its Sirius XM stake as a source of funds, as it looks for growth opportunities including cable consolidation.

Sirius XM’s buyback helped boost Liberty Media’s stake to 53%. The company will likely sell down to 50% and therefore recoup the $1.7 billion it paid to bring its ownership from 46% to 50%, Macquarie said.

The note added that Liberty could also take out margin loans against Sirius XM stock to fund future Charter investments.

Liberty Media shares were up 1.5% at $143.43 Thursday morning.

Follow Matthew Rocco on Twitter @MatthewRocco