SiriusXM Gets $8.25 Million In Settlement Of Contested Stock Buyback

Story by Inside Radio

SiriusXM will collect $8.25 million to settle a shareholder lawsuit brought against its board of directors over contested stock repurchases it made from Liberty Media. The suit argued that the satcaster overpaid when it bought $500 million of its stock back from Liberty, which owns a majority stake in the company. The defendants admitted no wrongdoing in settling the complaint, which was made on behalf of the satcaster in what’s known as a derivative action.

The proposed settlement, which still requires court approval, stems from a stock repurchase plan in October 2013 under which the satcaster set out to buy back $2 billion in shares on the open market and in private transactions. As part of the buyback, the SiriusXM board approved a $500 million repurchase of its stock from Liberty Media. In November 2013, in the first portion of the buyback, the satellite broadcaster paid $160 million to Liberty for 43,712,265 shares at a 1.5% discount to the stock’s trading price. But the second transaction, set for January 2014, never happened. That’s when Liberty announced a deal to buy all of the SiriusXM stock it didn’t already own and asked the satcaster to defer on the share buybacks. SiriusXM agreed but two months later, Liberty withdrew its merger bid and said it wanted to push ahead with share repurchases. So the satcaster repurchased $340 million of its shares from Liberty for the final portion. But this time, instead of a discount, it paid $3.66 per share for stock that was trading at $3.12 per share.

That prompted shareholder Thomas V. Rux to sue SiriusXM CEO Jim Meyer, Liberty CEO Greg Maffei and other current and past SiriusXM board members, as well as Liberty Media and its chairman John Malone. In what’s known as a shareholder derivative complaint, the action claimed the directors breached their fiduciary duties, and that Malone and Liberty “aided and abetted” the breaches in connection with the Liberty repurchases.

In October 2016, Liberty and SiriusXM asked the Delaware Chancery Court to toss the complaint, claiming that the suing stockholder didn’t prove that a majority of the directors were beholden to Liberty chairman and ex-Sirius director John Malone, Law360.com reported. The suit alleged SiriusXM overpaid for the Liberty repurchase by $50 million.

Now the parties have reached a proposed settlement in which SiriusXM will receive $8.25 million, most of which will be paid by the director defendants’ insurance companies. Rux, the shareholder who filed the suit, plans to apply for a fee and expense award and the legal team that argued the suit intends to ask the court for up to 30% of the settlement cash or $2.475 million. The agreement is subject to the court’s approval with a hearing set for Jan. 16, 2020. Stockholders, who will receive nothing, are being given the opportunity to oppose the settlement.

“The settlement provides substantial immediate benefits to Sirius XM and the Sirius XM stockholders without the risk that continued litigation could result in obtaining similar or lesser relief for SiriusXM and Sirius XM stockholders after continued extensive and expensive litigation, including trial and the appeals that were likely to follow,” Sirius XM said in a court filing.