As most investors in Sirius XM Holdings (SIRI) are aware, its majority owner, Liberty Media (LMCA), had proposed a share exchange to acquire the remaining shares of Sirius XM that it did not already own. The proposal was for an exchange of 0.076 shares of a new series of Liberty stock for each non-Liberty owned share of Sirius XM, and valued the offer at $3.68 per share. A special committee of the independent directors was charged with evaluating the Liberty offer. Today that committee announced that it had:
...retained Evercore Group L.L.C. to act as its financial advisor and Weil, Gotshal & Manges LLP to act as its legal counsel to assist and advise the Special Committee in connection with its evaluation of Liberty Media Corporation's proposal to acquire all of the outstanding shares of common stock of SiriusXM not owned by Liberty Media.
While the legal counsel is not particularly important, the selection of Evercore could be an indication that Sirius XM will be looking for Liberty to sweeten its offer.
Brian Kraft of Evercore has been covering Sirius XM since at least 2011. Coincidentally, before the market opened on the day that Liberty made its proposal, Kraft and Evercore had issued an upgrade of Sirius XM:
to "overweight" from "equal weight" on a valuation basis and prospects for core business growth.
Kraft and Preeti C. Doshi increased their price target for Sirius XM from $3.90 to $4.50, predicting "rapid growth in 2014 and beyond." While they acknowledged that the current price (Sirius XM had closed at $3.50 the day before the upgrade was released) "fairly values the core business", they had also argued that the "core business should continue to grow at a healthy rate."
Evercore's price target is right at the average of the 17 analysts polled by Thompson/First Call. It should be interesting to see what price Evercore deems a fair price to pay for an asset it felt could grow to $4.50 per share.
In addition to announcing the financial advisor and legal counsel, the committee also agreed to postpone the completion of its planned $500 million dollar share purchase from Liberty. The next installment, which was scheduled for later this month, has been deferred to coincide with the April purchase. That April purchase, if completed, will now be $340 million.
The selection of a financial advisor that has been covering the stock for a while and has a price target right at the average seems a reasonable choice. Now, that advisor has to determine a fair value for Sirius XM investors, a number that should fall between the $3.50 for its "fairly" valued core business and its $4.50 price target. The Q4 earnings call scheduled to take place on February 4th could shed some light on the date that the report back from Evercore is due.
Additional disclosure: I actively trade SIRI. In addition to my long positions in SIRI, I have January 2015 $4 covered calls written against two of these positions. I may initiate new covered call positions or close out or open new positions in SIRI or LMCA at any time.