Bare-knuckled battle for control of SiriusXM


Sirius XMBack in 2009 John Malone was the white knight whom Mel Karmazin recruited to rescue SiriusXM from the brink of bankruptcy. Now the satellite radio company is a real money machine – and Karmazin is in the fight of his life to keep Malone from taking over.

Malone’s Liberty Media filed applications with the FCC last month to have control of SiriusXM’s satellite radio licenses transferred to Liberty. That was an unusual filing because it was made without either the approval of the current licensee or a court order.

SiriusXM fired back with a petition for the FCC to either dismiss the applications or deny the transfers. SiriusXM, represented by super-lawyer and former FCC Chairman Dick Wiley, said Liberty was just plain wrong in claiming that it has de facto control of SiriusXM and that the board of directors remains in control of SiriusXM, while Liberty is merely a significant minority shareholder. And while the preferred stock that Liberty holds is convertible into a 40% stake in SiriusXM stock, it hasn’t even exercised the conversion right.

In its latest filing Liberty has presented the FCC with a chicken or egg dilemma. It claims to need prior FCC approval before taking actions that result in it having de facto control of SiriusXM. So it agrees with SiriusXM that it does not have de facto control, but insists that is “completely irrelevant.” But Liberty insists that it could exert de facto control at any time with its 40% stake, especially since many shareholders don’t actually vote their shares, and that the FCC has previously recognized even lesser percentages of ownership as constituting de facto control. So it is again urging the Commission to approve the license transfers over the objection of the licensee.

RBR-TVBR observation: What is the purpose of Malone’s maneuvering? If you look at his record on Wall Street you’ll get a clue. Malone has made billions through complicated stock moves – creating multiple companies and tracking stocks – sometimes doing spin-offs and sometimes mergers to maximize the financial value. In this case, if Liberty is able to get control of SiriusXM and raise its stake above 50% it would then be able to distribute its SiriusXM stake to shareholders – including Malone, the biggest stockholder – in a tax-free move.