Liberty Media Chairman John Malone said his effort to take control of Sirius XM will eventually lead to a spinoff. Liberty announced plans six weeks ago to assert control of the satellite-radio company after receiving approval from the FCC. The goal is to spin off Sirius, in keeping with Liberty’s history of making its properties, including DirecTV and Liberty Global Inc., into their own publicly held companies, Malone said last week at the Allen & Co. conference in Sun Valley, ID.
“If I’m in control, I like to have separate companies, run independently, with public shareholders investing in that business,” Malone told reporters. “There is no question eventually Sirius will be an independent company. The question is, in what time frame and in what circumstances?”
Liberty needs FCC approval to complete a takeover because Sirius holds airwave licenses issued by the agency. Sirius holds airwave licenses issued by the agency. Sirius, led by CEO Mel Karmazin, has opposed Liberty control in its own FCC filings.
The company will probably execute a so-called Reverse Morris Trust, which involves splitting off its Sirius stake as a separate entity and giving its stockholders the option to hold or sell their Sirius shares, according to a Bloomberg story.
Liberty’s interest in a Reverse Morris Trust is to save on capital gains taxes, according to Brett Harriss, an analyst at Gabelli & Co. Distributing Sirius shares to Liberty stockholders through a spinoff instead of selling them on the open market would let the company avoid paying taxes on the sale.