Liberty Media Gets Option to Up Sirius XM Stake
John Malone's Liberty Media said on Tuesday it has entered into a contract that gives it the option to increase its stake in satellite radio company Sirius XM to 45.2 percent.
Liberty Media already has a 40 percent stake in Sirius and has tried to take control of the business in recent weeks. Last week the U.S. Federal Communications Commission dismissed Liberty Media's application to take control of Sirius' operating licenses.
The Englewood, Colorado company confirmed it has entered into a forward purchase contract for 302 million shares of Sirius XM, with a forward price of $2.15 per share or a total of $650 million.
It said if the forward contract is physically settled, it will increase Liberty's stake to 45.2 percent.
Executives at Liberty have said the company could boost its stake above 49.9 percent. It already holds five of Sirius XM's 13 board seats.
Shares in Sirius XM rose by 1 percent in early trading to $2.18.
Liberty became the largest shareholder in Sirius after it loaned the satellite radio company $530 million to help it avoid bankruptcy in 2009. The terms of the loan converted the loan to a stake.
"It's part of their plan to eventually get a stake large enough to execute a Reverse Morris trust," said Gabelli & Co analyst Brett Harriss. Such a move could allow Liberty Media to spin out its Sirius stake and combine it with the rest of the company as a way to distribute Sirius shares to Liberty Media shareholders in a tax-efficient manner.
Malone's Liberty businesses own significant strategic stakes in a variety of businesses including book retailer Barnes & Noble and concert promoter Live Nation Entertainment .
In a statement Chief Executive Greg Maffei welcomed a recent move by Microsoft Corp to take a stake in Barnes & Noble's e-book reader business saying it validated Liberty's strategy.
Liberty Media on Tuesday also reported that its first-quarter revenue fell 55 percent to $440 million and adjusted operating income decreased 77 percent to $110 million. It said the declines resulted from a significant recognition of deferred revenue and costs in the year-earlier period at its True Position unit.
Liberty Media's operating businesses include pay-TV channel Starz which increased its subscriptions at its eponymous channel by 7 percent to an all-time high of 20.1 million subscribers and 2 percent at Encore to 33.6 million subscribers.
(Reporting By Yinka Adegoke; editing by John Wallace, Dave Zimmerman)