John Malone, you are one slick bastard. Okay, maybe calling him a “slick bastard” is a little harsh (even though it probably isn’t). Instead, I will go with “One Shrewd and Crude Businessman”. But I do not say that with anger, I actually say that with a little bit of admiration. Let me explain – you do not become the second largest private land owner in the United States (behind Ted Turner) by being a “nice guy” and a “fair” businessman. Mr. Malone is an accumulator of wealth. Sirius XM Holdings (SIRI) just happens to be the next pawn in Mr. Malone’s chess game.
Mr. Malone had the cunning to play hardball during a time when there was a credit crisis and banks were not lending any money out since it appeared as if the world was self-destructing. Liberty Capital stepped in and John Malone was the white knight. As time passed, Liberty’s intentions never seemed clear to me causing me to shy away from investing in SIRI for the last year. I sold the last of my bulk SIRI shares in November 2012. Not until just recently did I repurchase a small lot of shares as a commitment to myself to write articles about the stock for my website.
As I sit back and look at what this “One Shrewd and Crude Businessman” is trying to accomplish, acquiring a multi-billion dollar company for pennies on the dollar and then shuffling some paper around (offering Liberty shares in a conversion). Do they sell that paper at Office Depot? I need to get me some of that magic, wealth-creating paper!
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I’ve recapped the steps it took for Mr. Malone to get to this point with Sirius XM Radio (I vote to change the name back). Also, the below summary is not an all-inclusive version of the activity, just a recap of the major items.
- July 2008 – Federal regulators finally approve the $3.3 billion offer from Sirius Satellite Radio to purchase its competitor, XM Satellite Radio; the length of time to approve the offer nearly bankrupts both companies; the two companies merge and later become Sirius XM Radio
- February 2009 – Liberty Media obtains a 40% equity stake in Sirius XM Radio for providing them with $530 million in a loan to Sirius XM Radio could meet other debt obligations; the loan plus 13% interest was entirely paid back; John Malone looks like a white knight
- April 2012 – Liberty Media tries to take “De Facto” control of Sirius XM Radio, even though it has a preferred equity stake that, if converted, equates to only a 40% equity stake
- May 2012 – Liberty Media discloses open market purchases for 60 million shares of SIRI; not long after he also discloses that Liberty has entered into a forward purchase contract for 302 million additional shares of SIRI, with a forward price of $2.15 per share (notional amount of $650 million); Once settled, this increases Liberty’s ownership to over 46% on a converted share basis
- December 2012 – Liberty discloses additional open market purchases of 2 million SIRI shares bringing their total ownership to approximately 49.8% before SIRI’s Board of Directors announce a $2 billion common stock repurchase program, which Liberty does not participate in to help increase their ownership percentage
- January 2013 – Liberty Media discloses that it purchased another 50 million shares of SIRI, as well as converted its preferred shares, and now owns over 50% of the outstanding common shares; Liberty immediately appoints members to SIRI’s Board
- October 2013 – Sirius XM Radio’s Board of Directors approved an additional $2 billion common stock repurchase program; SIRI also also announced that it has agreed to repurchase $500 million of common stock from Liberty Media and its affiliates at a price per share determined based on a discount to the volume weighted average price of the common stock during a period following the release of the Company’s earnings for the third quarter. The shares are intended to be purchased in three installments in November 2013, January 2014 and April 2014, but the purchases may be accelerated under certain circumstances (circumstances like “we are taking over your company so just pay us your cash first for us to do it”)
I am from the Chicago area and let me tell you one thing – Al Capone, a notorious Chicago gangster in the 1930’s, would be very proud of Mr. Malone if he were alive today. Mr. Malone is in the process of stealing a multi-billion dollar company for pennies on the dollar. A heist of major proportions. All without paying taxes. Al and John would probably be pretty good friends.
While it does not appear the brightest, do not yet close the book on SIRI and the $3.68 offer made by Liberty. The final chapters for SIRI have not yet been written. Liberty’s current offer to “purchase” the rest of SIRI with Liberty shares still requires a majority approval from Sirius’ minority stake. That means they require approval from the Fund managers holdings shares as well as the retail investors, like me and you (even though retail investors typically do not have the best voting percentage).
Even though I admire Mr. Malone as “One Shrewd and Crude Businessman”, I do know how I’m voting my shares. I hope there is a box on my proxy vote called “stick the $3.68 offer up your ass”; if not, then I will at least check the “no” box if a write-in space is not available. This business man (me) wants more than $3.68 for his shares.