John Malone of Liberty Media is pulling out all the stops in his latest bid to take over Sirius XM, which is run by Mel Karmazin (above), the longtime Gotham-based media boss. (Christopher Peterson/BuzzFoto.co)
It could be curtains for Karmazin.
John Malone’s Liberty Media told regulators yesterday it wants to take control of Sirius XM Radio — which could put Liberty CEO Greg Maffei in perfect position to run the satellite broadcaster.
That means that Mel Karmazin, the current CEO of Sirius, who famously chafes at being a No. 2, could be headed out the door after more than seven years atop the New York-based company.
Karmazin was the second banana at Viacom but made it clear he didn’t like working under chairman Sumner Redstone.
Karmazin, 68, could be tempted to walk after his contract expires Dec. 31 if Liberty is successful in its appeal to the Federal Communications Commission.
“Greg is sick of being a portfolio manager,” said a source close to the Liberty Media boss, who oversees a host of companies including Starz, Live Nation, Barnes & Noble and Sirius XM Radio.
Liberty has praised Karmazin’s management ability and are not seen as aching to push him out — but the question is: Will Mel want to stay?
Liberty did not return a call for comment. Sirius declined comment.
In its request to the FCC, Liberty said it would convert half of its B-1 preferred stock into common stock, which would constitute 32 percent of the common shares. Liberty will also nominate its own board members “as soon as practicable,” it said in the filing.
It’s Malone’s second appeal to the FCC.
In March, the FCC rejected Liberty’s argument that it already had “defacto control,” with its 40 percent voting control.
Liberty has a better argument now. It raised its stake from 40 percent to 46.2 percent in May.
Sirius responded to Malone’s attack with its own filing — saying it is continuing discussions with Liberty and has “not reached an agreement with respect to a specific transaction that would be mutually beneficial to both our common and preferred stockholders.”
“If they can’t get an agreement and Liberty takes over, Mel’s already said he won’t work for someone else,” said Lazard Capital analyst Barton Crockett. “Liberty would have to look for a new CEO.”
Crockett added that if Liberty could get control, “the FCC license application is a formality.”
“What is going on is negotiations for Liberty to exit in a way that avoids taxes,” the analyst added.
A source familiar with talks said Karmazin’s primary goal is to extract a premium for stakeholders, though it’s unclear what poker chips Karmazin has to play.
The two sides are said to be discussing a deal that would help Liberty avoid paying a $2 billion tax bill on the value of its $6.3 billion equity and debt holdings.
One way to avoid that tax bill is through a “Reverse Morris Trust” maneuver, which involves combining a spin-off with a merger.
Liberty is believed to want to pair Sirius with a company that it has owned for more than three years, such as the Atlanta Braves or TruePosition, a location technology company, or perhaps, even its piece of Live Nation, and then spin it off as a new stock.
Sirius stock closed flat in yesterday’s session at $1.89. Sirius has 22.3 million subscribers and expects to add around 1.6 million net additions this calendar year.