Liberty Media Corporation (NASDAQ: LMCA) is going for broke in its fight to take control of SIRIUS XM Radio Inc. (NASDAQ: SIRI).  In short, this is a going to be a boxing match between John Malone and Mel Karmazin.   A filing with the SEC from Liberty shows that Liberty has asked the Federal Communications Commission to reconsider its refusal in early May of the company’s previous application to take control of SIRIUS XM.  Liberty had 30 days to file an appeal,a nd today’s filing should not be a surprise.  It does, however, have serious implications for SIRIUS XM.

What has happened is that Liberty has raised its stake in SIRIUS to just over 46% from the 40% that Liberty owned when it filed with the FCC for de facto control.  The company purchased another 60.35 million shares during May.  For real control, Liberty may have to formally buy more shares and get up to that “50% plus one vote” so that it can take control.

In the filing it is noted that the FCC dismissed the applications because such applications “are defective with respect to ‘execution’ and ‘other matters of a formal character.’”  Here are the actions which Liberty is vowing to take:

• convert almost one-half of the shares of B-1 Preferred Stock, which, together with the shares of Common Stock owned or acquired by the Reporting Person, will constitute more than 32% of the total outstanding shares of Common Stock;
• as soon as practicable, nominate for election persons to serve on the Issuer’s Board of Directors such that, if elected, persons nominated by the Reporting Person will constitute a majority of such Board of Directors;
• vote all of the Reporting Person’s shares of Common Stock in favor of such nominees; and
• solicit proxies from other shareholders of the Issuer in support of the election of such nominees.

Here is the real smoking gun showing that John Malone is going to go for total control: “The Reporting Person also indicated in the Petition that it intends to continue purchasing shares of Common Stock in the open market, depending upon price and other market conditions, and that the Reporting Person may purchase sufficient additional shares of Common Stock that would enable it to replace the entire Board of Directors by unilateral action.”

What is interesting is that this could be bad for current SIRIUS investors because the free float of stock could be rising substantially.  This is not exactly a buyout.  It sure looks like Liberty wants control so that it can distribute these shares to Liberty holders in what is probably a tax-free spin out to Liberty shareholders.  The problem here is that when companies spin out units in this manner the new shareholders often turn around and immediately sell those shares to take the cash.

SIRIUS XM shares are up 1.5% at $1.915 on volume that is not exactly through the roof.

JON C. OGG

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