DirecTV / Liberty Entertainment Merging: Why This Affects Sirius XM

Includes: LMDIA, SIRI, T
by: Rad Sat Daily

DirecTV (NYSE:DTV) and Liberty Entertainment (LMDIA) on Monday announced that they will be merging and spinning off the merged company. Liberty's programming units Liberty Sports, the Game Show Network and Fun Technologies will be merged with DirecTV. As part of the deal the new entity will assume $2 billion of Liberty's debt and $30 million in cash. DirecTV will also make $650 million in Liberty loan payments.

Analysts said the consolidation of Liberty's Entertainment and DirecTV units could help clear the way for Liberty Media's eventual control of Sirius XM Radio (NASDAQ:SIRI).

It's a little disheartening that any company (including Liberty Media) now owns 40 percent of Sirius XM. Liberty Media, as part of deal with Sirius XM Radio, is not allowed to acquire more than 49.9 percent of Sirius XM Radio for three years. Inevitably, after three years, Liberty Media will likely increase their stake and moves like this help to clear the way for that to happen.

Additionally, moves like the recent "poison pill" move is a sign that Sirius XM Radio may be positioning itself to make an acquisition too expensive for anyone but Liberty. Sirius and XM Radio shareholders currently still own 60 percent of the company. Our only issue with Liberty is that no one truly knows their agenda yet as it relates to Sirius XM Radio.

Disclosure: Author holds a long position in SIRI