SiriusXM shareholders are buzzing this weekend as a result of a late Friday announcement that Liberty is trying to take over SiriusXM.  While it is still very early in the process, there are a few things that SiriusXM shareholders will want to understand.

1.  The company is not being taken private.

2.  If approved, SiriusXM shares will cease to exist.  Shareholders of SiriusXM will become shareholders of LMCA series C shares.

3.  LMCA - C shares are non-voting shares

4.  The transaction needs to be approved by 3 entities -

  • A majority of the minority of SiriusXM shareholders must approve (The minority is all shares other than Liberty held shares)
  • A majority of Liberty media shareholders
  • The independent members of the SiriusXM Board of Directors

5.  The offer is that each share of SIRI stock would get an investor 0.076 shares of the new Liberty series C stock.  Simply stated, it would take 100 shares of SiriusXM stock to get 7.6 shares of the new Liberty stock.  Simplifying further, you would get one share of the liberty stock for each 13 shares of SiriusXM stock you own.

6.  Assuming approval, you would no longer be invested into satellite radio as a "pure play"  The LMCA series C stock is a conglomerate of of companies.  They will include SiriusXM, a stake in the Atlanta Braves, True Position, Charter Communications, Live Nation, Barnes & Noble, Time Warner, and Viacom.

As a shareholder of SiriusXM, you might be a bit flustered at this point.  The bottom line is that there is actually very little you can do if you are opposed to the deal.  There are enough shares held by a handful of institutions (figuratively speaking) to win the majority of the minority.

The essence of this deal is that it is tied to the price of two equities.  Currently the offer is 0.0253 of the current share price of Liberty Media.

There is no immediate action required by shareholder of SiriusXM, though some may want to enter or exit a position prior to the news.  One simple way to look at this is in the following manner.

  • If you have $1,000 to invest, you could buy 7 shares of Liberty, or 267 shares of SiriusXM
  • Your Liberty shares will garner you 14 shares of LMCA series C (plus the 7 shares of LMCA you already own)
  • Your SiriusXM shares will garner you 20 shares of Liberty series C

Thus, in concept, I see it as an advantage to be a Liberty shareholder, as you still have some voting power.

We will continue to update this story as new developments arise.  For the moment, understand that the offer is based on a ratio.  SiriusXM will want to increase that ratio.  This is especially true considering that SiriusXM will make up most of the market cap of the new entity.