Sirius XM (NASDAQ: SIRI) and Liberty Media (NASDAQ: LSXMA), (NASDAQ: LSXMB), (NASDAQ: LSXMK) shares are moving in opposite directions Tuesday following a proposed combination of the two companies. Sirius’ share price was down by 3.2% as of 12:15 p.m. ET, according to data from S&P Global Market Intelligence. Meanwhile, Liberty Media’s stock was up by roughly 4.5%.
Sirius XM and Liberty Media published press releases Tuesday morning detailing their proposed combination. Liberty already owns a controlling stake in Sirius, but it’s clear from the market’s response to the news that shareholders in the two companies have differing takes on the idea.
Altogether, Liberty Media already owns a roughly 83% stake in Sirius XM — a controlling interest. In addition to the Liberty Sirius XM subsidiary, Liberty has two subsidiaries — Liberty Live Group and Formula One Group. The Liberty Live Group houses 10 individual business units, while the Formula One Group subsidiary houses five distinct business units.
The proposed deal would see the Liberty SiriusXM tracking stock group, which includes stocks trading under the LSXMA, LSXMB, and LSXMK tickers, separated off and combined with Sirius XM into a new entity called “SplitCo.” Needless to say, the proposed combination looks complicated, and it’s not surprising that current Sirius XM shareholders are a bit apprehensive about it.
To some extent, the proposed combination between Sirius XM and the Liberty SiriusXM tracking stock group looks to be a sensible one. It would bring one of Liberty’s biggest assets fully under its corporate umbrella. On the other hand, the deal comes with unknown variables for existing Sirius XM shareholders.
While a combination of Liberty’s Sirius XM holdings to create a single entity might seem like a natural move, it could come with other shifts. For example, it’s possible that the combined entity could be integrated with other Liberty Media subsidiaries.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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