John Malone’s Liberty Media is considering doubling down on Sirius XM after saving it from the brink of bankruptcy two years ago. The company is having discussions about adding to its sizable stake in Sirius. As part of a deal to lend Sirius up to $530 million, Liberty acquired 40% stake in Sirius (voting preferred shares) in March 2009. Liberty’s 12.5 million preferred shares, if converted into common stock, are now worth $4.5 billion.
The investment has so far had a great ROI, with Liberty earning 15% on most of the loans it made to Sirius and, as a bonus, got a big stake in the company.
While a source confirmed to The Post the talks are ongoing, Liberty Media CEO Greg Maffei didn’t say much about it at the company’s investor day 11/17, when asked about whether Liberty would spin off its stake in Sirius.
In Q3, SiriusXM reported $104 million in net income, up 54% from a year ago, while revenue rose 6% to $763 million. If Sirius does a stock buyback in 2012, a prospect that is seen as increasingly likely, then Liberty’s ownership would also rise unless Sirius is allowed to buy back a portion of its shares held by Liberty.
Right now, Liberty could increase its Sirius stake to 49.%, giving it a controlling interest, but there are tax implications and other disadvantages to doing so. After March 2012, however, those issues disappear, making it easier for Liberty to up its stake.
RBR-TVBR observation: The wildcards for Sirius are the increasing number of folks listening to Internet radio in the car, and the upcoming price hike to $14.49 per month (this is what happens when two competitors are combined to create a monopoly). That could send some customers packing. But ask anyone, when customers balk about price, SiriusXM customer service often will cut a discounted deal.