Much has been stated about Liberty Media's (NASDAQ:LMCA) pursuit of control of Sirius XM (NASDAQ:SIRI). Article after article and comment after comment, debate goes back and forth about what will ultimately happen and what the expectations are for the share price in the meantime.
But one issue is touched upon quite a bit more often than others lately. It's a question of "premium." We see the word over and over again. Sirius XM shareholders want their premium. Liberty will not pay a premium. Mel Karmazin is holding out for a premium for the remaining shares. Liberty shareholders expect a premium. And of course, the big guy, John Malone, wants his premium too.
It can be confusing. Who gets this magical premium, and just how big is it? I mean... is it like when my younger brother and sister used to fight over the little swirl on the top of the margarine tub, to the point where one of them would cry and the other would be smiling ear to ear because they got that prized swirl? Or is there a real premium to be had here, like the piece of cake with the extra frosting on it? Heck, I cried over that one, but it *was* my birthday.
As we grow up we begin to understand that life just isn't fair sometimes. We also begin to understand that he who carries the biggest stick often gets the biggest prize. If you command the superior position, nine times out of ten you will get the better part of what you seek. While it may not seem fair to those not sitting in the king's chair, it's simply how the world works.
This is why for me, as a Sirius XM shareholder, I don't expect any sort of premium as Liberty moves to take over. The reality of the situation here is that the largest stake holder in Sirius XM is Liberty Media at over 46%. Institutions and retail shareholders, while they might make up around 54%, are a fragmented assembly of smaller positions. Whether or not Liberty has control, Liberty is in a position to take control without much difficulty. Whether they wish to do this or not, or how they do it, is not the issue here. They can. That's all that matters.
So, in the battle for premium between Sirius XM and Liberty Media, Liberty will likely come away with a premium if there is any to be had. That said, with attention turned to Liberty, the question can be asked "who holds control at Liberty Media?". The answer, John Malone. While some may be a bit confused at John Malone's statement that he should be receiving the premium :
"There are three parties in this deal - Sirius and its shareholders, Liberty and its shareholders, and there's me personally because I am the controlling shareholder in Liberty," said Malone. "So when you ask yourself, 'Should there be a control premium and if there is one, who should get it,' don't forget about me."
To me it's quite simple. Liberty controls (or will control) Sirius XM. John Malone controls Liberty Media. Control, like it or not, is in John Malone's hands. If there is a control premium, who should get it? According to John Malone, he should. Like it or not, he's right.
Does it all really matter? Is what is being argued over here akin to the swirl on the top of the margarine, or is it the better frosted piece of cake? Either way, control premium or no premium, John Malone sits at the top, big stick in hand. As a Sirius XM shareholder I may not like this, but I accept it, and I'm not crying about it (this time.)
Likewise, as a Sirius XM shareholder I recognize that the battle for this premium may result in destruction of the premium itself. A battle for cake results in a mess, and on more than one occasion the swirl at the top of the margarine was mashed by my sister or brother (or parents) to stop the arguing. I feel that what's best for all involved here is for Sirius XM to sit down with Liberty Media and work together to get the inevitable control issue squared away so Liberty may complete their reverse Morris trust without having to resort to a more hostile approach.
And please, forget the premium.