Having been stymied by the Federal Communications Commission last week in its gambit to take over Sirius XM Radio Inc., Liberty Media revealed its next move on Tuesday — bumping up its stake in the company to 45.2% from 40%.
Liberty's chief executive, Greg Maffei, told analysts in a conference call that his company had a contract in place to buy 302 million shares of SiriusXM for $650 million at $2.15 a share from undisclosed sellers.
The price represents a discount to SiriusXM's $2.17 closing price on Monday, prior to Liberty's announcement. SiriusXM lost 3 cents to $2.14 Tuesday after Maffei unveiled his move.
The two companies have been locked in a struggle for control since March, when Liberty started the high-stakes corporate chess match with a request to the FCC for control of the operating licenses SiriusXM needed to broadcast its satellite radio service. Liberty argued that its 40% ownership, along with five out of 13 seats on the board, meant it had "de facto" control of SiriusXM.
SiriusXM's chief executive, Mel Karmazin, strenuously objected, deriding Liberty's attempt as trying to convince regulators that "40 is the new 50." His point was that shareholders needed to have more than 50% of a company to call the shots.
It seems that Liberty's chairman, John Malone, heard the message loud and clear and is moving toward that magic 51% mark.
But why 45.2% as opposed to 51%? Would that change the commissioners' minds at the FCC, should Liberty choose to exercise its option to amend its request to regulators by June 4?
Here's Maffei's answer to those questions, which were posed to him during the earnings call with analysts:
"We thought it was attractive financially and because we thought it increased some of our options.... As far as de facto control, my layman's understanding would be we have a certain series of rights by contract with SiriusXM. To be able to fully exercise those rights freely, we need to have de facto control approved by the FCC. And as far as changing our application, I think there are host of things, actions we might take including this action we have taken, which will have bearing on our application and we'll weigh those, as we said, over the next 30 days and decide how to amend."
In other words, if 45.2% is enough to persuade the FCC to hand over the licenses, why spend the extra money to get to 51%?
— Alex Pham
Photo: SiriusXM Chief Executive Mel Karmazin, left; Liberty Media Chairman John Malone, right. Credits: SiriusXM and Liberty Media.