It sure does seem as if Sirius XM Radio
Speaking at the Reuters Global Media Summit yesterday, the satellite radio giant's helmsman addressed speculation that Liberty Capital
"They could call me and say 'Mel, I love the company so much, I want to buy the whole company,'" he said, as retold by Reuters. "They haven't called and I don't suspect they will."
Liberty Capital has the right to take a majority stake in Sirius XM in a few months, but can it even afford it?
Liberty Capital already has a 40% preferred share stake in the company, and its move earlier this month to do away with Liberty Media's tracking stock structure by combining Liberty Capital with Liberty Starz -- a move it completed on Monday -- will make it easier to complete future acquisitions.
With the equivalent of 6.5 billion shares outstanding, it would cost more than $1.1 billion for every 10% stake that anyone would want to acquire at today's prevailing share price. Any kind of massive nibbling would naturally move the stock higher, especially as it thins out the company's massive float.
If Liberty Capital was serious, it could borrow money. It could also sell some assets. However, even the sale of the Atlanta Braves would only be good for a sliver of Sirius XM's outstanding shares. Does it really want to sell its 21% stake in Live Nation
Sirius XM is a name that often leaves investors scratching their heads. It doesn't have the essential trait of a growth stock: Revenue climbed a mere 6% in its latest quarter. Cynics wouldn't let Sirius fly as a value stock, even though it may surprise some to learn that it's trading for less than 10 times earnings if we go all the way out to 2014. However, the stock has managed to find a home with individual investors, many of them performing double duty as some of the service's 21.3 million subscribers. That may not seem like much, but that's the cheering section that has been treated to one of the market's best performers since Sirius XM bottomed out at $0.05 a share in early 2009.
Maybe Karmazin is ready for a new opportunity. His contract is up at the end of next year. A buyout would dovetail nicely with his potential departure. However, it's not as if Sirius XM will have a ton of gentleman callers waiting on its porch. Liberty Capital's 40% stake is enough to scare away potential bidders, while Sirius XM's healthy share gains since bottoming out two years ago give it little reason to settle for anything less than a healthy market premium that few companies can afford.
Next year will definitely be another interesting one for Sirius XM.
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