Liberty Media clears path to take control of Sirius XM

Liberty Media informed the Securities and Exchange Commission on Friday that it had acquired more than 48% of Sirius XM Radio’s shares and intends to push that amount above 50% in order to take control over the New York satellite radio company.

Liberty disclosed the plan several months after it failed to persuade the Federal Communications Commission to grant it control over Sirius based on its ownership of 40% of the company’s shares.

Sirius’ chief executive, Mel Karmazin, rebuffed the takeover attempt at the time, saying Liberty’s argument that its 40% stake was sufficient to gain control was akin to proclaiming “Forty is the new 50.”

Liberty’s chairman, John Malone, might have taken that barb to heart. Since March, the New York media conglomerate has been buying up Sirius shares; its stake is now 48.1%. In its report to the SEC, Liberty said it “intends to acquire beneficial ownership of additional shares of common stock that, together with its current beneficial ownership, would represent more than 50% of the outstanding shares.”

Once it surpasses the 50% threshold, Liberty said it will take control of Sirius and “spin off to its stockholders a subsidiary that will hold certain businesses, assets and liabilities.”

The most likely reason for the spin-off is to avoid taxes. Liberty executives have hinted at doing a reverse Morris Trust, in which it would combine Sirius with a Liberty property and spin off the resulting entity, so it could avoid having to pay taxes for acquiring Sirius. The most likely asset to combine with Sirius seems to be Liberty’s Starz premium pay-television network.

The question now is whether Karmazin will remain at Sirius’ helm after the Liberty takeover. Karmazin has hinted that he might not stick around because he prefers to be his own boss. Sirius’ paying subscriber base has more than quadrupled since Karmazin joined the company in 2004, when it had about 1 million subscribers. (The figure does not include the subscribers of XM Radio, which Sirius merged with in 2008.) As of June 30, SiriusXM had 22.9 million.

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