New York – Liberty Media CEO Greg Maffei told investors Wednesday that any future transaction with satellite radio giant Sirius XM would depend on its ability to monetize high cost shares, a move that could take at least 18 months to complete.
Liberty already owns about 49.6% of Sirius, and has expressed plans to take full control of the company. In August it asked the Federal Communications Commission for permission to take outright control of Sirius – which it is still awaiting – and has regularly bought shares on the open market to increase its stake. At Liberty’s annual Investor Day meeting here Wednesday, Maffei said Liberty has acquired 611 million Sirius shares so far this year, for a total of $1.4 billion.
Liberty acquired the bulk of its Sirius XM holdings after issuing a $530 million loan to the then-struggling company in 2009. As part of that deal, Liberty received warrants equal to 40% of Sirius XM’s outstanding shares.
Liberty has acquired about $3 billion of Sirius stock since first exercising those warrants, and would sell back those shares to Sirius in the event it spun off the asset through a Reverse Morris Trust transaction. Liberty has used the RMT vehicle for several previous spins – including DirecTV in 2009 – which would allow it spin off the interest into a separate company, along with a hard asset and then combine that spinoff with Sirius. The result would be a tax-free distribution of the Sirius stake to shareholders and a simplified structure for Sirius.
Maffei estimated that it would take Sirius at least 18 months to complete such a buy.
“We would want to get our capital out before we do a Reverse Morris Trust,” Maffei said, adding that it is not a given that is the path Liberty will ultimately take. “If it takes 18 months, that would be sort of a minimum.”
Meanwhile, Sirius has been humming along. The radio giant announced Wednesday that it added 446,000 new subscribers in the third quarter, ahead of analysts’ expectations for about 325,000 additions. As a result, Sirius increased it year-end guidance, stating it expects to add about 1.8 million new subscribers in 2012, up from previous estimates of 1.6 million additions. Sirius shares were up 4.6% (12 cents each) on Wednesday to $2.75 per share.