FEBRUARY 18, 2009, 8:51 A.M. ET Malone Scoops Up Sirius XM Liberty Media Investment Blocks Satellite Competitor From Taking Control
By VISHESH KUMAR and SARAH MCBRIDE Wall Street Journal http://online.wsj.com/article/SB123491792394504631.html?mod=testMod John Malone's Liberty Media Corp. scooped Sirius XM Radio Inc. from the clutches of bankruptcy Tuesday with a last-minute deal. The move was classic Malone: squeezing attractive terms from a distressed company while also thwarting the advances of a longtime opponent. While Mr. Malone's end game remains unclear, his second-in-command, Liberty Media Chief Executive Greg Maffei, said the motivation was primarily financial, rather than as a partnership for Liberty's DirecTV Group Inc. Liberty's John Malone, shown in July, is known for driving hard bargains. "We were not trying to take advantage of Sirius, but these are very difficult market conditions and we saw the opportunity to structure a conservative deal with a lot of upside if it works," said Mr. Maffei. Liberty declined to make Mr. Malone available for comment. In return for lending Sirius $530 million, Liberty will receive a 40% stake in the satellite-radio operator, plus at least two board seats. The loan will also bear an interest rate of 15%. Sirius had warned it might have filed for bankruptcy if it couldn't reach a deal on its debt. The deal blocks satellite rival Charles Ergen, whose Dish Network Corp. had accumulated debt in Sirius due Tuesday and had been talking to Sirius about a deal to take control. "Liberty wanted to stop Ergen from getting his hands on this asset and being able to build out new capabilities," said Tuna Amobi, an analyst at Standard & Poor's. While Mr. Ergen had planned on using assets from Sirius XM such as wireless spectrum to roll out new services like mobile TV, Mr. Maffei played down any potential benefit from combining satellite radio and TV services. "There are few operating synergies," Mr. Maffei said. Some observers are skeptical that Liberty would sink $530 million into Sirius without some broader plan. Some analysts speculated Mr. Malone may flip his Sirius stake -- a tactic the 67-year-old billionaire has used many times before. Mr. Maffei said Liberty was impressed by the prospects of Sirius XM's business and saw an opportunity in the crisis the company was facing. "This is a very savvy deal because, in this environment, cash is king," said Doug Mitchelson, an analyst at Deutsche Bank. A cable executive for nearly three decades of his career, Mr. Malone developed a reputation for driving hard bargains, often structuring complex financial transactions to take advantage of distressed situations. He has collected an assortment of businesses under the Liberty umbrella, including home-shopping network QVC, the Atlanta Braves baseball team and a 30% stake in Ticketmaster. Last year, Liberty gained a controlling share in DirecTV after Mr. Malone accumulated a chunk of stock in News Corp., which then held the DirecTV shares. News Corp. owns Dow Jones & Co., publisher of The Wall Street Journal. He built up TCI, a small rural cable operator when he joined it in 1972, before selling it to AT&T Inc. in 1998 for $48 billion. For the time being, it appears Mr. Malone will let Sirius operate with few changes, even among its most expensive shows. The most famous is Howard Stern's $500 million, five-year contract, but Mr. Maffei said Mr. Stern played a key role in driving subscriber growth. Sirius isn't out of the woods yet. Another $350 million in bank debt matures in May. And $227 million in debt, mostly held by Mr. Ergen, matures in December. If Mr. Ergen refuses to roll over that debt, the company will have to come up with the cash to pay him. The funds extended by Liberty could cover the debt. -- ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 Mail: antunes at uh dot edu *********************************** * POST TO [email protected] * *********************************** Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
