Bloomberg News

Liberty’s Malone Says Sirius Will Eventually Be Spun Off

July 12, 2012

Billionaire John Malone said his effort to take control of Sirius XM Radio Inc. (SIRI:US) will eventually lead to a spinoff of the largest U.S. satellite-radio company.

Malone’s Liberty Media Corp. (LMCA:US) announced plans six weeks ago to assert control of the satellite-radio company after receiving approval from the Federal Communications Commission. The goal is to spin off Sirius, in keeping with Liberty’s history of making its properties, including DirecTV and Liberty Global Inc., into their own publicly held companies, he said yesterday.

“If I’m in control, I like to have separate companies, run independently, with public shareholders investing in that business,” Malone told reporters gathered in Sun Valley, Idaho, for an Allen & Co. conference. “There is no question eventually Sirius will be an independent company. The question is, in what time frame and in what circumstances?”

Liberty needs FCC approval to complete a takeover because Sirius holds airwave licenses issued by the agency. Sirius holds airwave licenses issued by the agency. Sirius, led by CEO Mel Karmazin, has opposed Liberty control in its own FCC filings.

The company will probably execute a so-called Reverse Morris Trust, which involves splitting off its Sirius stake as a separate entity and giving its stockholders the option to hold or sell their Sirius shares, according to James Ratcliffe, an analyst at Barclays Capital Inc. in New York.

Genachowski Dinner

Malone said he had dinner with FCC Chairman Julius Genachowski last night, declining to say what was discussed.

Sirius rose 1.7 percent to $2.07 at the close in New York. The stock has climbed 13 percent this year. Liberty shares, up 15 percent in 2012, fell less than 1 percent today to $89.64.

Liberty Media Chief Executive Officer Greg Maffei isn’t likely to want the job of running Sirius, Malone said. As head of Liberty, Maffei manages a holding company with a wide range of investments, everything from cable programmer Starz LLC to the Atlanta Braves baseball team.

“Greg’s not an operating man,” Malone said yesterday. There are plenty of good managers, including inside the company.”

Malone also praised Karmazin, the current CEO of Sirius: “He does a good job.”

Karmazin has said in the past that he doesn’t like to work underneath someone else. “I’m just not good at being a No. 2,” he told Fox Business Network in 2009.

Viacom President

Karmazin served as Sirius Satellite Radio’s CEO before its 2008 merger with XM Satellite Radio, when he took control of the combined company. He was previously president and chief operating officer at Viacom Inc. Karmazin clashed with Viacom Chairman Sumner Redstone because he couldn’t get the top job at the media giant. Before that, he ran CBS Corp. until 2000.

Malone said Karmazin should “make peace” with Redstone.

“He needs to go back into his history, transport himself back in time, mend his fences with Sumner and be a new person,” Malone told reporters. “Relax, enjoy his success, bask in the glory, and enjoy his job. He does a great job. We love him.”

Patrick Reilly, a spokesman for New York-based Sirius, didn’t immediately respond to a request for comment.

The New York Post reported last month that Maffei may want to run the satellite broadcaster directly, leading Karmazin to leave after the Sirius CEO’s contract expires on Dec. 31. Maffei is tired of being a portfolio manager for a broad swath of companies, the Post reported, citing a person familiar with the matter.

Maffei has denied that report. “The New York Post story is wrong,” he said on CNBC at the time.

Liberty’s interest in a Reverse Morris Trust is to save on capital gains taxes, according to Brett Harriss, an analyst at Gabelli & Co. in Rye, New York. Distributing Sirius shares to Liberty stockholders (LMCA:US) through a spinoff instead of selling them on the open market would let the company avoid paying taxes on the sale.

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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Companies Mentioned

  • SIRI
    (Sirius XM Holdings Inc)
    • $3.19 USD
    • -0.03
    • -0.78%
  • LMCA
    (Liberty Media Corp)
    • $128.84 USD
    • 0.07
    • 0.05%
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