Liberty Media Corp. has asked the Sirius XM board of directors to OK a plan to split off the business that holds SiriusXM and combine it with the rest of Sirius XM holdings, to create a new company.
Billionaire John Malone holds 83% of SiriusXM, the satellite radio company that also owns the Pandora music streaming platform. His shares are held in a tracking stock called the Liberty SiriusXM Group, which trades under the ticker symbol LSXMA.
The rest of the company best known for hosting shock jock Howard Stern is traded through Sirius XM Holdings, ticker symbol SIRI.
Shares of Malone’s Liberty SiriusXM Group jumped Tuesday morning, adding $1.39, or 6.1%, to $24.03. The lightly traded shares exceeded their typical volume for the day within the first hour of trading.
SiriusXM Holdings shares, meanwhile, dipped 12 cents, or 2.9%, to $3.89. with volume also heavy.
SiriusXM Holdings said in a statement that a special committee of its board is evaluating the plan and it won’t discuss developments until the board makes its decision.
Liberty’s proposal would see it split off its Sirius shares to form a new subsidiary and combine it with SiriusXM Holdings to form a “New SiriusXM.”
The deal would provide stockholders in Sirius XM Holdings with a cash payment to counter the debt that Liberty carries that the new company would assume in addition to shares in the new entity.
Following the deal, Liberty would end up owning 84% of the new company, and the current SiriusXM Holdings shareholders would own 16%.
“Liberty’s proposal rationalizes the dual corporate structure between LSXM and SiriusXM and provides value to all shareholders with a more flexible and attractive currency in New SiriusXM,” said Liberty CEN Greg Maffei in a statement. “SiriusXM minority shareholders will also benefit from enhanced trading dynamics, including increased liquidity and likelihood of future index inclusion.
Maffei said Liberty intends to remain “We are excited about the prospects for New SiriusXM and look forward to remaining “meaningfully invested in the business” following the split.
Malone holds a wide range of media investments, including Warner Bros. Discovery, Live Nation Entertainment and various sports franchises, including professional racing’s Formula One Group. Earlier this year, Liberty split off its holdings of Major League Baseball’s Atlanta Braves into a separate, publicly traded company.
Analysts have long expected a move from Liberty to combine its shares and the rest of the company. Wells Fargo called the proposal “a much-awaited process.”
The Wells analyst wrote in a note to clients that agreeing to the deal will remove a key overhang on Sirius shares and should benefit SiriusXM Holdings shareholders in the long term, including with the possibility the company could be included in an index, which would make the stock a prime target for mutual funds that track the index.
Waiting for the proposal has weighed on SirusXM stock, the analyst wrote, according to TheFly.com, adding that Liberty may accept a counter-proposal from twith better terms for SiriusXM shareholders, such as a higher dividend, lower exchange ratio or more cash/less debt when combined.