Liberty Media said Tuesday that it has communicated a proposal to a special committee of the board of Sirius XM Holdings, outlining the terms of a proposed combination of the Liberty SiriusXM tracking stock group, with the satellite radio giant, led by CEO Jennifer Witz, to form a “new, consolidated public company.”Liberty, led by president and CEO Greg Maffei and chairman John Malone, says on its website that it owned an 83 percent stake in Sirius XM as of July 31. Wall Street has in the past repeatedly suggested a proposal to take full control of the satellite radio company, which operates the SiriusXM and Pandora brands, could be in the works.Liberty’s business stakes and interests are attributed to three tracking stocks, designed to track the performance of different businesses: Liberty SiriusXM Group, Formula One Group, and Liberty Live Group. The Liberty SiriusXM Group tracking stock is listed under the ticker symbol LSXM, while SiriusXM’s stock market listing is under ticker symbol SIRI.The minority shareholders of SiriusXM would collectively own approximately 16 percent of what is dubbed “New SiriusXM” once the deal closes, with the holders of LSXM stock collectively owning approximately 84 percent, the firm said on Tuesday.“Liberty’s proposal rationalizes the dual corporate structure between LSXM and SiriusXM and provides value to all shareholders with a more flexible and attractive currency in New SiriusXM,” said Maffei. “SiriusXM minority shareholders will also benefit from enhanced trading dynamics, including increased liquidity and likelihood of future index inclusion.”He concluded: “We are excited about the prospects for New SiriusXM and look forward to remaining meaningfully invested in the business. This simplified structure will also allow management to better focus on its strategic priorities, drive the company’s continued growth and simplify the investor relations story.”In the proposed transaction, Liberty would separate LSXM “by means of a redemptive split-off of a newly formed subsidiary of Liberty (“SplitCo”), which would own all of the assets and liabilities attributed to LSXM,” the firm said. “In the split-off, holders of each series of LSXM common stock would receive a number of shares of a single series of common stock of SplitCo calculated based upon each underlying share of SiriusXM common stock held by SplitCo being exchanged for 1.05 shares of common stock of New SiriusXM. SplitCo would then combine with SiriusXM to form New SiriusXM, with the minority shareholders of SiriusXM receiving shares in New SiriusXM on a one-for-one basis.”In addition, minority shareholders of SiriusXM would receive a pro-rata cash payment calculated based on the amount of the outstanding net debt of LSXM assumed by New SiriusXM in the proposed transaction. “New SiriusXM would have a single outstanding series of common stock, with each share entitling the holder thereof to one vote per share,” Liberty explained. “By way of example, based on recent outstanding share counts, holders of LSXM common stock would receive 10.3 shares of New SiriusXM common stock for each share of LSXM common stock held at closing, and, based on the projected outstanding principal amount of LSXM net debt at year-end, the minority shareholders of SiriusXM would receive one share of New SiriusXM common stock plus $0.55 in cash for each share of SiriusXM common stock held at closing.”In classic Malone fashion, the proposed transaction is structured to be tax-free, except with respect to any cash received. It would be subject to, among other things, “the negotiation and execution of mutually acceptable definitive transaction documents and applicable board approvals, including the approval of a special committee,” Liberty said. “No further updates on the proposed transaction will be provided unless and until definitive documents are executed or discussions between the parties terminate.”The proposed deal would not result in any changes to Liberty Media’s Liberty Formula One tracking stock or the Liberty Live tracking stock group.Sirius XM acknowledged the receipt of “a non-binding proposal from Liberty Media Corporation regarding a potential transaction involving the company.”It also said in a reaction: “The special committee, together with its advisors, Solomon Partners Securities LLC and Debevoise & Plimpton LLP, is evaluating the proposal. There can be no assurance that the proposal, or any other transaction, will be completed or, if so, as to the terms and conditions of any such transaction.”
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