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2 Stories to Watch With Liberty Media

Liberty Media (NASDAQ: LMCA  ) is widely known as a deal-making engine. The company operates as a financial vehicle for a wide-reaching strategy of media consolidation involving cable, broadband, radio, event promotion, and even professional sports. The great thing about Liberty Media is that it is a long-term-oriented, shareholder-pleasing business with first-class management. Lately, the company has made waves across its various businesses, with a spinoff of the cable and broadband assets in the works, as well as some beefing up of its holdings. Here are two stories to watch.

Sirius debate
When Liberty made its polarizing decision to acquire a majority stake in Sirius XM Radio (NASDAQ: SIRI  ) , most people assumed that Chairman John Malone wanted to bring the satellite radio business fully into Liberty's empire. In January, that assumption was proven correct when Liberty made an all-stock offer valuing Sirius at $3.68 per share -- an offer that was ultimately rejected by Sirius' management and shareholders.

Many believe it's only a matter of time before Liberty comes back with a more compelling offer for the business, or just seizes it outright. The acquisition makes plenty of sense for Liberty. Wholly owning Sirius would give the company a tremendous market cap and range of assets to access billions more in capital -- and that's exactly what Malone and CEO Greg Maffei want in order to expand the business and conduct more megadeals.

All of that said, Maffei made it clear this week that Liberty will not chase down Sirius to bring it in. By playing the long game, Maffei is ensuring that existing shareholders are not overpaying for Sirius. It would be very easy for the company to up its bid, especially considering the additional cash flow that Sirius would provide (in heaps), but Liberty's managers are committed to making deals on their terms. Going forward, it will be interesting to see how Liberty courts the portion of the business it does not already own.

Play it live
Liberty made additional headlines this week upon announcing that it is acquiring millions more shares of Live Nation Entertainment (NYSE: LYV  ) via convertible notes. Liberty already owns 26% of the world's biggest event promoter, and the additional 3.7 million shares could bring that number closer to 28%.

The bet is an interesting one, considering that Live Nation, while a growing giant, is currently unprofitable. In the music industry, concerts are the profit drivers as sales of recorded music continue to decline. Liberty clearly sees event promotion as the future of the industry, and the additional cash flow of ticket broker TicketMaster helps fund Live Nation's operations.

The big question here is whether Liberty is interested in owning Live Nation outright. If so, how would it fit in with the rest of the company's operations? As Liberty readies to spin off its cable and broadband assets into a new entity (Liberty Broadband Group), the core company will be left with the 53% Sirius stake, the interest in the Atlanta Braves, Live Nation, and a few other minor investments.

One thing is for sure: Liberty continues to set up for a long-term future of cash flow-heavy assets and big-picture concepts of the future of media.

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Michael Lewis

Michael is a value-oriented investment analyst with a specific interest in retail and media businesses. Before coming to the Fool, Michael worked with private investment funds focusing on deep value and special situations. Currently living in the media capital of the world--Los Angeles, California.

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Related Tickers

8/28/2015 4:00 PM
LMCA $37.38 Up +0.26 +0.70%
Liberty Media CAPS Rating: ****
LYV $24.80 Down -0.05 -0.20%
Live Nation CAPS Rating: ***
SIRI $3.83 Up +0.04 +1.06%
Sirius XM Radio CAPS Rating: ***