Sirius May Start Bidding War: EchoStar v. Liberty

siriusxmradio Sirius-XM, the financially troubled satellite radio broadcaster, may be sold to Liberty Media--which also owns a majority stake in DirecTV, according to The New York Times. This sets the stage for a showdown between Liberty Media's John Malone and Charles Ergen, boss of rival EchoStar, who has also made preliminary overtures toward acquiring Sirius-XM.

Whichever company ends up owning the satcaster, the result will be a significant concentration of satellite media ownership in the United States.

Sirius-XM's financial woes virtually guarantee that it will be sold to someone. Last week, the company was rumored to be preparing to file for Chapter 11 bankruptcy protection. The news came just a week after EchoStar's Ergen bought several hundred million dollars of the satcaster's debt that was about to mature, apparently as part of a bid to take over the company.



However, by filing for bankruptcy protection, Sirius-XM could limit Ergen's leverage, forcing him to acquire the company at a higher price than he originally planned. Thus, the threat of a bankruptcy filing is a negotiating tactic in Sirius-XM CEO Mel Karmazin's discussions with Ergen, in which Karmazin is trying to get the best deal for his bondholders.

As of Friday, the satcaster chief and the EchoStar boss had not reached an agreement on the latter's planned takeover of the company, with sources close to the negotiations saying the two do not get along at a personal level--no surprise, given their reputation for larger-than-life egos. Still, a decision must be reached by Tuesday, when Sirius-XM must make a $175 million payment on debt owed mostly by Ergen, or declare bankruptcy.

The ongoing disagreement between Karmazin and Ergen created an opening for Liberty Media's Malone, who has approached Sirius-XM with an alternative takeover proposal. Details of the proposal are unknown, and it's possible that Malone is merely trying to jack up the price of Sirius-XM for EchoStar, Liberty's main competitor.

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