Liberty Media on Friday said it would offer to buy out the minority shareholders in satellite radio provider Sirius XM Holdings, in a deal that could give cable mogul John Malone a freer hand in driving cable consolidation.
Liberty, which has a large stake in cable operator Charter, has made no secret of its pursuit of No. 2 cable provider Time Warner Cable. Liberty Media Chief Executive Officer Greg Maffei said that Friday's offer to make Sirius XM a subsidiary gives holding company Liberty the financial flexibility to pursue other deals.
Liberty's Maffei said in an interview that one scenario this deal allows for could be for Liberty to acquire more Charter stock. It currently owns 27 percent of Charter shares.
Maffei said that some think Charter has to maintain a high percentage of Charter stock "so it becomes a good operating asset for us and not an investment company asset."
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"I'm not suggesting this is correct but one supposition could be that this allows us to go make incremental investments in Charter, to maintain our stake in Charter because we have access to the cash flow at SIRI and the borrowing capacity at SIRI. That's one way that (it) could help get the Time Warner Cable deal done," he said.
Maffei declined to comment on when Charter might make an offer for Time Warner Cable. Reuters has reported that an offer valuing the cable company at below $135 per share could come early this year.
Maffei told analysts on a conference call on Friday that Liberty Media's new market value after it absorbs Sirius XM will be $27 billion. This is up from its current market value of $16.6 billion.
Maxim Group analyst John Tinker said that Sirius XM is expected to generate $1.5 billion in earnings before interest, taxes, depreciation and amortization this year, which is additional cash now on Liberty's balance sheet.
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"What Liberty is doing here is giving themselves a big balance sheet, a huge gun. Now that Liberty Media is going up to $27 billion, suddenly Time Warner Cable doesn't look like such a big stretch," Tinker said.