Sirius XM Radio Inc. (SIRI) shareholders lost a bid to stop Liberty Media officials from seeking to acquire a controlling stake in the satellite-radio provider after a judge denied their request to block further purchases of Sirius shares.
Delaware Chancery Court Judge Leo Strine refused to bar Liberty Media Chairman John C. Malone from adding to his 48 percent Sirius stake despite shareholders’ concerns that the billionaire had started what they called in court papers a “creeping takeover” of the U.S.’s largest satellite broadcaster.
The shareholders’ request for an injunction to keep Malone from buying more Sirius shares “is a bit of a stretch,” the judge said yesterday at a hearing in Wilmington. “I’m not going to rule by the seat of my pants on this.”
Sirius investors sued Malone and other Liberty Media (LMCA) executives who serve as Sirius directors yesterday, alleging they are improperly blocking other board members from erecting anti-takeover defenses for the broadcaster.
Liberty Media, based in Englewood, Colorado, said earlier this month that it intends to increase its holding in Sirius to more than 50 percent to take control the firm and its airwave licenses.
Kelly Sullivan, a spokeswoman for Sirius, didn’t immediately return a call for comment yesterday on the judge’s decision. Courtnee Ulrich, a Liberty spokeswoman, also didn’t return a call.
Liberty Media officials said in an Aug. 17 filing with the Federal Communications Commission that by increasing its stake, the company is poised to take control of Sirius within 60 days of receiving regulators’ approval of airwave-license transfers.
Liberty Media is a holding company with a range of investments, including stakes in the cable TV programmer Starz LLC and Major League Baseball’s Atlanta Braves. Malone said last month that he intends to spin off Sirius as a publicly traded company once he gains a controlling stake.
Malone got the Sirius stake after providing a $530 million loan in 2009 that kept the satellite broadcaster out of bankruptcy. The investment agreement barred Malone from attempting to gain control of the radio provider for three years, investors said in the complaint.
Now that the three-year period has ended, Malone and Liberty are seeking to gain control of Sirius without paying a premium, the City of Miami Police Relief and Pension Fund, a Sirius shareholder, contends in the complaint.
As part of the loan agreement, Sirius’s board was barred from setting up anti-takeover defenses that would hinder an acquisition of the broadcaster, according to court filings.
Investors are challenging that provision as illegal under Delaware law and had asked Strine to bar Malone from acquiring any more Sirius shares until his fellow Sirius directors could properly evaluate whether anti-takeover defenses should be put in place.
Strine said yesterday that he would hear expedited motions to decide whether the Sirius investors’ case should proceed within the next month.
The case is City of Miami Police Relief and Pension Fund v. Sirius XM Radio Inc., Delaware Chancery Court (Wilmington).
To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at email@example.com