Liberty Media, led by president and CEO Greg Maffei and chairman John Malone, said Tuesday it has submitted a proposal to a special committee of the board of directors of Sirius XM Holdings outlining the terms of a proposed combination of the Liberty SiriusXM tracking stock group, which is listed under the stock symbol LSXM, will see the satellite radio giant, led by CEO Jennifer Witz, form a “new consolidated publicly traded company.”
SiriusXM’s minority shareholders would collectively own approximately 16 percent of what is called “New SiriusXM,” while former holders of LSXM common stock would collectively own approximately 84 percent.
“Liberty’s proposal rationalizes the dual corporate structure between LSXM and SiriusXM and delivers value to all shareholders with a more flexible and attractive currency in New SiriusXM,” Maffei said. “SiriusXM minority shareholders will also benefit from improved trading dynamics, including increased liquidity and the likelihood of future index inclusion.”
He concluded: “We are excited about the prospects for New SiriusXM and look forward to continuing to meaningfully invest in the company. This simplified structure will also enable management to better focus on its strategic priorities, drive the company’s continued growth and simplify the investor relations story.”
In the proposed transaction, Liberty would separate LSXM “through a redemptive spin-off of a newly formed subsidiary of Liberty (“SplitCo”), which would own all assets and liabilities attributed to LSXM,” the company said. “Upon the spin-off, holders of each series of shares of LSXM common stock would receive a number of shares of a single series of shares of SplitCo common stock calculated based on each underlying share of SiriusXM common stock held by SplitCo exchanged for 1.05 shares of common stock . stock of new SiriusXM. SplitCo would then merge with SiriusXM to form New SiriusXM, with SiriusXM’s minority shareholders receiving one-for-one shares in New SiriusXM.”
In addition, minority shareholders of SiriusXM would receive a pro-rata cash payment calculated based on the amount of LSXM’s outstanding net debt assumed by New SiriusXM in the proposed transaction. “The new SiriusXM would have a single outstanding series of common shares, with each share entitling its holder to one vote per share,” Liberty explains. “By way of example, based on recent numbers of shares outstanding, holders of LSXM common stock would receive 10.3 shares of New SiriusXM common stock for each share of LSXM common stock held at closing and, based on the expected principal amount outstanding of LSXM net at year end, SiriusXM minority shareholders would receive one share of New SiriusXM common stock plus $0.55 in cash for each share of SiriusXM common stock held at closing.
In classic Malone fashion, the proposed transaction is structured to be tax-free, except with respect to cash received. It would, among other things, be subject to “the negotiation and execution of mutually acceptable definitive transaction documents and applicable board approvals, including the approval of a special committee,” Liberty said. “No further updates on the proposed transaction will be provided unless and until definitive documents are signed or discussions between the parties have concluded.”
The proposed deal would not result in any changes to Liberty Media’s Liberty Formula One tracking shares or the Liberty Live tracking share group.
