Liberty Media Corporation (NASDAQ: LMCA) sure appears to want to take control of SiriusXM Radio Inc. (NASDAQ: SIRI) without really taking full control. If you have not been keeping up with the situation, the news flow has been full of reports that John Malone and Liberty sure want to take over the control of SiriusXM even though Liberty does not have a majority stake of 50.1%. Mel Karmazin and Sirius are obviously fighting for this one.

A new report from the Wall Street Journal shows that the expiration of a 2009 investment agreement has Liberty wanting to declare what is called “de facto control,” even though the fully diluted stake would be about 40% control if Liberty were to convert its preferred shares.

Where this gets interesting is that Liberty is sitting on huge gains in the preferred shares because it came in as a virtual white knight when SiriusXM shares were trading as though the company was a bankruptcy candidate. John Malone is rather well-known for seeking the most advantageous tax structures possible, and control would allow for what may be a tax-free spin-off of the SiriusXM shares to Liberty Media shareholders. What does not seem likely is that Liberty would take control to take Sirius private, nor to just hold it as a parent company or holding company structure. But in this day and age, we would not rule out any scenarios when it comes to money and media.

SiriusXM is asserting that Liberty has to buy more shares of the satellite radio monopoly before it can claim true control. Maybe Malone and friends at Liberty have proxy votes from other holders — maybe not.

There is one other issue that makes this situation even harder and harder to keep up with. Malone’s Liberty empire is already very carved up, and it is no easy task to keep with which Liberty is which Liberty. There is Liberty Interactive, Inc. (NASDAQ: LINTA) with its QVC networks. Then there is the Liberty Global, Inc. (NASDAQ: LBTYA), which provides video, broadband Internet and telephony services, primarily in Europe and Chile. Both companies have share derivations as well for classes of stock.

This one is not close to being over, and with 20+ million subscribers it could have a big impact on how America gets its media, if you took a de facto proxy fight argument to the extreme.

It may be determined that Liberty either has to get enough shareholders to side with it or that it has to buy another 10% stake in SiriusXM to effect its ability to take control and conduct a tax-free spin-off to the Liberty Media shareholders. Unfortunately, that might imply that shareholders would have to wait another year for the long-term capital gains tax rates to apply, and the entire U.S. tax structure is up in the air right now as many of the tax rates are set to expire or change, at least for some, at the end of 2012.

Stay tuned.

JON C. OGG

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