Liberty Media (NASDAQ:LMCA) announced Monday that the planned sale of some of its Sirius XM (NASDAQ:SIRI) shares back to Sirius XM is now completed. Sirius XM completed the deal on April 25th by buying 92,888,561 shares at a price of $3.66 per share. The latest purchase brought $340 million into the Liberty Media coffers. Liberty Media remains the majority shareholder of Sirius XM with over 50% of the shares outstanding.
Ironically, Liberty Media was able to sell these shares at a substantial 17% premium over the $3.12 price that Sirius XM shares closed at on Friday. The closing of this deal was not unexpected. Sirius XM announced in its quarterly call that the transaction was slated for April 25th.
Liberty Media had invested some $1.7 billion into what it terms as high cost basis shares of Sirius XM. This represented monies spent to go from 40% ownership in Sirius XM to over 50% ownership. With this transaction now complete and a $164 million dividend at the end of 2012, the cash outlay on high cost basis shares now stands a bit over $1 billion. Over the last few years Liberty has indicated a desire to recoup the cost basis. This could happen via additional share purchase agreements, a dividend, or a new deal.
Sirius XM still has $1.7 billion left under its current share buyback program. If Liberty does not participate, the ownership percentage of Liberty will increase with each share repurchased. Liberty and Sirius XM could very well make a new announcement on some Liberty shares, but such a deal may be a bit more complex than the first. This is simply because Liberty received such a premium on the last deal due to market conditions.
Had the latest transaction happened at current share prices Liberty's take would have been about $290 million instead of $340 million. Even though Sirius XM is a "cash cow" of sorts, a $50 million premium is not likely something that the company wants to repeat despite Liberty players controlling the board of directors at Sirius XM.
In what may be the ultimate irony, Liberty was able to sell back shares at a rate pretty close to what represented the Liberty offer to take over Sirius XM back in January. Liberty scrapped that proposal about a month ago and has since moved on to a restructuring of its businesses to separate its cable interests from everything else.
Cleaning things up further, Liberty Media has substantially reduced its stake in Barnes & Noble as well. In a deal that closed 2 weeks ago, Liberty received over $250 million for most of its shares. Liberty had originally obtained the stake for just over $200 million 3 years ago, thus netting over a 20% return. Between the Barnes and Noble deal and the closing of the Sirius XM transaction, Liberty has scooped up about $600 million in the last few weeks.
What is next for Liberty Media? That is the burning question many would like to know. I would not be at all surprised to see the company reinvigorate some sort of deal involving Sirius XM. Liberty has a focus on the cable industry, but still needs more cash to be in the best possible negotiating position. Stay tuned, because Liberty reports earnings in a little over a week.
Disclosure: I am long LMCA, SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.