Liberty Media Corp.
) filed a new application named Form 4 to the U.S. Federal
Communications Commission, as the company has further acquired
1.88 million shares of
SIRIUS XM Radio Inc.
Liberty Media bought these additional shares of SIRIUS XM for
about $5.2 million or $2.749 per share. So, a further purchase of
1.88 million shares of SIRIUS XM has raised Liberty Media's stake
to 49.77%, excluding 7% Exchangeable Notes of SIRIUS XM, which if
converted into common shares may increase Liberty Media's
ownership to 49.82%. Hence, the company's intention to acquire
more than 50% stake apart from taking full control of the Board
of SIRIUS XM, remains well within grip.
SIRIUS XM Radio is the largest satellite radio operator in the
U.S. However, the company was facing severe financial crunch in
2009, during the peak of the Great Recession. A significant
downturn of the auto industry jeopardized SIRIUS XM's revenue as
the company is mostly dependent on the auto sector (automobiles
with inbuilt commercial radio network) for its survival.
At that juncture, Liberty Media provided $530 million in loan
to SIRIUS XM to avoid bankruptcy. That loan was in lieu of 40%
stake of SIRIUS XM given to Liberty Media through preferred
During the last couple of years, SIRIUS XM has successfully
turned around its fortunes, with commendable subscriber growth
and a service rate hike. We believe the turnaround of SIRIUS XM
makes Liberty Media interested in gaining full control.
Earlier, Liberty Media raised its stake in SIRIUS XM to 48.1%
through an open market purchase of SIRIUS XM's shares and now the
company is planning to gain full control of the latter, thereby
increasing its stake by more than 50 However, the whole exercise
depends on the impending FCC nod for Liberty Media to take
control of SIRIUS XM.
We maintain our long-term Neutral recommendation on Liberty
Media. Currently, it holds a short-term Zacks #3 Rank (Hold) on
LIBERTY MDA-LC (LMCA): Free Stock Analysis
SIRIUS XM RADIO (SIRI): Free Stock Analysis
To read this article on Zacks.com click here.