By Relmor Demitrius
Sorry get rich quickers. Liberty is not going to be making a large tender offer for the entire company anytime soon. This was reported comments made at a Reuters Media Conference this week from Mel Karmazin. Irresponsible journalism is running rampant again on issues we have been discussing for years now. According to Reuters, Sirius XM (NASDAQ:SIRI) CEO Mel Karmazin stated that no offer has come and he doesn’t expect it too.
When Greg Maffei (CEO of Liberty Capital) was asked recently if they would ever be selling their stake in Sirius XM, he laughed. We know this because it’s a 4 billion dollar leveraged asset they received for free. According to their latest slides discussing their holding in Sirius XM, they stated they are “Riding the Growth Path” of Sirius XM. Since logic dictates that when you get 40% of something for nothing, you don’t add money to get another 10% or 20% simply for more control, when you are already basically in control of big money issues such as debt, acquisitions, and large uses of cash. They also have a strong board presence as well. Liberty has stated many times they like Mel in control, they like management, and they are doing an excellent job. So if they don’t need control of day to day operations, they won’t take it unless absolutely necessary. Now if Sirius XM was in trouble, their management incompetent, that would be another story entirely. Mel Karmazin basically yesterday squelched the silly and obviously wrong report by the NY Post stating Mel and Malone were in talks for Liberty to “add” more stake in the company. This is illogical to begin with because Sirius XM is not for sale. Mel would not be willing to sell anymore to Liberty. If they want more control they will offer a tender and that wouldn’t be something they would need the board to discuss. Hence the report is more than likely wrong. If anything they are in talks on how to work a stock buyback, something Malone has a history of doing with a majority of his major holdings in Liberty Media.
As the stock is ripe to repurchase at these levels, that is the more likely scenario, to be announced sometime in 2012. 2012 has been the year Mel Karmazin has stated will be the year the board makes a decision on how they will return capital to shareholders. Expect something after March, when Liberty is fully capable of adding if they would like. Mel wants clarity on the Liberty situation and is probably in the process of getting that now. All comments from Mel is postering at this point and should be taken with a grain of salt, also considering that his contract is coming due once again at the end of 2012.
We know Mel Karmazin is only interested in running Sirius XM as the #1 guy, and that doesn’t appear to have changed. All of Mel’s stated comments in the Reuters article have been said before by him, at other times in the past. There was nothing new in the article. Sorry all you get rich quick traders out there, but your going to have to buy and hold this one for a while. There is no magic jump coming that can be timed on a news event. You can think March is important to Liberty, but in reality it is more important for management and Mel Karmazin than to us. Even if Liberty did add in a tender, they wouldn’t tender for all, and you wouldn’t have to sell. You would also see the stock trade right to that price instantly. Since the shares would be bought by Liberty they would effectively be removed from the float.
The other way is that Liberty agrees to a buyback and the stock appreciates that way. Either way, Liberty has no master plan to screw the Sirius XM stockholder and only wants what is best for the company. As 40% owners, wouldn’t you? In the end, logic is always the way to go with these things, not wild rumors from the mass media.
Disclosure: Long SIRI
If Liberty agrees to a buy back, won’t their 40% stake increase significantly and how would Mel, Sirius and the shareholders feel about that? Would Liberty ever agree to sell a proportionate amount of their shares in a buy-back?
No one really knows how their percentage would work on a buyback. Of course Liberty would be interested in selling some of their stake slowly back to sirius xm. I see that over adding. I could see nothing too. The percentage issue might come down to the courts, imo.