Sirius XM
Liberty Media and Sirius XM Satellite Announce Merger Consistent With Initial Announcement, Modest Impact on SIRI Credit
Tue 12/12/2023 10:45 AM
Credit Research: Michael McCaffery, CFA
Relevant Items:
Liberty Media & Sirius XM Announce Merger 8-K
Liberty Media & Sirius XM Announce Merger Slides
Sirius XM Satellite Q3’23 10-Q
Liberty Media Q3’23 10-Q
Liberty Media Initial Proposal for Sirius XM Announcement
Sirius XM Satellite Initiation
Key Takeaways
- Consistent with our thesis when we initiated coverage on Sirius XM Satellite in August, Liberty Media and Sirius Satellite today announced a transaction to merge Liberty Sirius XM Satellite, which holds its approximately 84% stake in Sirius XM Satellite, with Sirius XM Satellite.
- The proposed transaction would be tax-free for shareholders and add about half a turn of leverage to the Sirius XM credit, from roughly 3.3x to about 3.9x, by the anticipated mid-2024 deal close.
Key Deal Terms
- Each series of Liberty Sirius XM Satellite, or LSXM, common stock would receive 8.4 shares of “New SiriusXM.”
- Minority shareholders of SiriusXM would receive shares in “New SiriusXM” on a one-for-one basis.
- Unlike the original Liberty Media proposal, this transaction will not include any special dividend to the minority shareholders of SiriusXM.
- Pro Forma Leverage, as anticipated at deal close will be about 3.9x, roughly a half a turn higher than current SIRI levels. As such, given the significant free cash flow generation of the business, we would expect a return to management target leverage of low-to-mid 3x is very achievable over the near term, as management committed in its investor presentation to pause material share buyback activity until this target leverage range has been reached.
Transaction Overview
Note: Final PF share count for prior LSXM shareholders reduced based on anticipated dilution from LSXM convertibles.
Sources: Company filings, Reorg estimates
Sources: Company filings, Reorg estimates
Management PF Leverage Forecast
Potential Impact to SIRI Credit
Sources: Company filings, Reorg estimates
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