Did Sirius XM Radio Inc. make a Faustian bargain when it decided to accept $530 million from Liberty Media Corp. to stave off bankruptcy in early 2009?
The New York-based satellite radio company filed a petition late Friday afternoon with the Federal Communications Commission, urging that the agency deny a request by Liberty Media Corp. that sought to transfer several of SiriusXM's operating licenses to Liberty's control. Liberty owns 40% of SiriusXM and occupies five of its 13 board seats.
But SiriusXM fought back, arguing in a 24-page petition that Liberty failed to get proper signatures from the company’s board for its transfer request.
“This is the equivalent of trying to cash an unsigned check and explaining the lack of a signature by saying nothing more than the account holder refused to sign it,” SiriusXM's attorneys wrote.
Liberty Media's intent, and the intent of Chairman John Malone, is unclear. The company did not state a reason for seeking control of those licenses and messages to Liberty Media's spokeswoman were not immediately returned.
At issue is whether Liberty's 40% stake in SiriusXM allows Malone to assume ownership of the satellite radio company, which last year earned a $427-million profit on more than $3 billion in revenue.
What's clear is that SiriusXM's last-minute arrangement with Liberty averted financial disaster, allowing the New York satellite radio company to make a $172-million payment on its high-interest loans just days before it was due in February 2009. The transaction also gave Liberty Media five of 13 seats on the company's board.
The deal also barred Liberty Media from trying to take over SiriusXM by acquiring 39.9% or more of SiriusXM's stock. That provision expired March 6.
"The expiration of the Investment Agreement Provisions does no more than remove certain barriers to Liberty Media's ability to take additional steps to acquire control of SiriusXM," SiriusXM's lawyers argued. "The SiriusXM Board controls the company, and Liberty Media's current minority representation on the board does not give it the ability to control SiriusXM."
(Eddy W. Hartenstein, publisher and chief executive of the Los Angeles Times and CEO of its parent, Tribune Co., is also a SiriusXM board member.)
Malone has a history of not-so-friendly takeovers. In 2004, he locked horns with Rupert Murdoch over control of News Corp. The lengthy battle ended in 2006 when Malone agreed to give up Liberty's 16.3% stake in News Corp. in exchange for 38.5% share in DirecTV, along with half a billion dollars in cash and three regional sports networks.
In the current clash of the media titans, it's now Malone's turn to make a move.
-- Alex Pham
Photos: SiriusXM Chief Executive Mel Karmazin, left, and Liberty Media Chairman John Malone appear to be duking it out over control of SiriusXM. Credit: Sirius XM Radio Inc. and Liberty Media Corp.