Liberty Media (NASDAQ:LMCA) has been seeking control of Sirius XM Radio (NASDAQ:SIRI) for quite some time. One could reasonably argue that this began with a $530 million loan in February 2009 when Liberty also received a 40% stake in Sirius XM for the nominal fee of $12,500. The pursuit began heating up late last year when Liberty entered a forward purchase agreement to buy more than 300 million common shares, and became public when Liberty filed an application with the FCC seeking de facto control. After the initial application was rejected, Liberty eventually submitted an application seeking de jure control.
This application was accepted for review and the following schedule was published by the FCC:
Interested parties must file petitions to deny or comments no later than Nov. 1, 2012. Responses or oppositions to comments and petitions must be filed no later than Nov. 13, 2012. Replies to such pleadings must be filed no later than Nov. 20, 2012. All filings concerning matters referenced in this Public Notice should refer to DA 12-1569, IB Docket No. 12-282, as well as the specific file numbers of the individual applications or other matters to which the filings pertain.
Alexander Bergmann submitted the only letter to the FCC in response to its request for "petitions to deny or comments." Yesterday, Nov. 13, Liberty Media filed its response, which was published on the FCC site today. In its response, Liberty noted that:
- No petitions to deny were filed,
- Bergmann's comments were "procedurally and substantively deficient and should be dismissed or summarily denied," and
- Liberty's application should be approved.
Liberty's extensive filing of nearly 70 pages argued that Bergmann's letter should not even be considered because it failed to meet the FCC's filing requirements and because Bergmann had no standing in the matter. Then, Liberty went ahead and responded to each of the issues raised by Bergman.
Liberty also took the opportunity to once again make its case as to why it should be allowed to increase its ownership of Sirius XM and to take de jure control of the licenses. Liberty noted that its ownership interest of 40% was carefully included and noted in seven applications by Sirius XM previously approved by the FCC. It also cited the press release issued at the time of the loan as proof that it had served the public interest by enabling Sirius XM to continue offering its unique service. From the filing:
At the time, the Chief Executive Officer of Sirius stated that Sirius was 'pleased to have come to this agreement with Liberty Media, particularly in light of today's challenging credit markets,' and that Liberty Media's loan was 'a vote of confidence' in Sirius that 'allows us to continue to provide the great content and innovative programming our subscribers know and love.' (emphasis added)
Thus, the public has been realizing the benefit of Liberty Media's transaction with Sirius for more than three years and will continue to do so.
Liberty also noted that when reviewing applications the FCC is required to consider whether, on balance, the benefits outweigh potential harm:
The Commission also evaluates 'whether the transaction is likely to produce public interest benefits' and weighs 'any potential public interest harms of the proposed transactions against any potential public interest benefits' to determine whether, 'on balance,' the proposed transaction will serve the public interest, convenience and necessity. ... Where, as here, there are no identifiable public interest harms arising from the transaction, the 'balance' of benefits to harms is simple and clearly supports grant of the Applications.
Liberty's response concluded with:
Bergmann comments should be dismissed or summarily denied and the Liberty Media Applications should be granted.
Another key date has passed, and, so has a bit more of the uncertainty surrounding Sirius XM. There is now one week for Bergmann to respond to Liberty's claims, after which the FCC can begin considering whether or not to approve Liberty's application. I do not expect that Bergmann will respond.
Considering the lack of protests from Sirius XM or its competitors, it is difficult to see the FCC denying the application or, for that matter, taking very long to issue a ruling. However, also considering the holiday season, and layers of bureaucracies, one never knows about time schedules.
Additional disclosure: I have $3 January 2013 covered calls against most of my SIRI position, as well as some $2 and $2.50 January 2013 and $2.50 December covered calls. I may initiate (or close) a buy stock/sell option position in SIRI, at any time. Also, in addition to long-term holdings, I have recently begun day trading 10,000 share blocks of SIRI and may continue to do so. I have no position in LMCA.