We originally maintained that Sirius XM shareholders were getting hosed here in this $3.68 buyout. This now shows that they will be getting hosed even worse. What we did not say in the article, but regretfully believe, is that John Malone and Greg Maffei are good enough at what they do that they will likely be able to pull off this low-premium buyout. Maybe they will ultimately pay a little more than $3.68, but they will likely be able to convince shareholders that Liberty deserves it since they were the ones that saved Sirius in the first place.
As a reminder, Sirius XM’s consensus analyst price target was closer to $4.60 prior to this. Evercore recently upgraded Sirius to Overweight with a $4.50 price target, based in part to the telematics business that Sirius talked up about the connected car in its press release.
Sirius showed that it ended 2013 with 25.56 million subscribers. This represents 1.66 million net subscribers added during 2013 versus its recently raised guidance of 1.6 million net additions. Sirius also showed that the self-pay net additions in 2013 were 1.5 million, bringing self-pay subscriptions to over 21 million.
The satellite radio player said that it expects to meet or exceed all other guidance provided for 2013. Adjusted EBITDA growth will continue to exceed 20%, and free cash flow per share will grow faster than that. By the way, it is this cash flow that Liberty’s management wants to likely use for its cable acquisition ambitions.
Sirius XM issued 2014 subscriber and free cash flow guidance as follows: Net subscriber additions of 1.25 million, Free cash flow approaching $1.1 billion, Revenue of over $4.0 billion, and Adjusted EBITDA of approximately $1.38 billion.
That $1.1 billion in free cash flow might not cinch a deal in cable, but that can likely be leveraged if John Malone is involved in the deal.
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