Sirius XM Radio Saved By The Bell
Sirius XM Radio Inc. has been saved from the brink of bankruptcy by Liberty Media who has agreed to inject $530 million to rescue the troubled satellite radio broadcaster from the clutches of Charlie Ergen’s Dish Network.
Liberty, the media and entertainment company founded by John Malone, will immediately loan Sirius $280 million, about $171 million of which will to pay off debt Sirius had coming due this week. A second round of $250 million from Liberty will also be invested into Sirius XM to help it pay its debts and sit upright. In return for the investment, Liberty Media will own 12.5 million shares of preferred stock in Sirius XM that Liberty can convert into common stock giving Liberty a 40% ownership stake in the radio company. Malone is expected to join the Sirius XM board of directors.
“We are excited to be investing in Sirius XM. We have been impressed with the company, its operations and management team,” said Greg Maffei, president and CEO of Liberty, in a written statement. “Sirius XM’s ability to grow subscribers and revenue in a difficult financial and auto market is indicative of how listeners view this as a ‘must have’ service.”
Mel Karmazin, CEO of Sirius XM, stated, “this agreement enables Sirius XM to continue to develop the opportunities first outlined in the merger of Sirius and XM. By strengthening our capital structure and enhancing our financial flexibility, this investment allows us to continue providing the great content and innovative programming our subscribers know and love.”
Ergen definitely came out the initial loser in this high-stakes round of poker between Karmazin and Malone. Ergen most likely thought he could waltz in and snatch away the company from Karmazin without much of a fight, but the tenacious CEO battled back from his “low stack” position. The street almost likes the move, the stock doubled in price to a whopping $0.16 per share…