Wall Street All Ears for Liberty Media's Sirius XM, Starz Plans

John Malone
Matthew Staver/Bloomberg via Getty Images

?John Malone's media company will hold its annual investor day in New York on Thursday, with Malone, CEO Greg Maffei, Starz CEO Chris Albrecht and Sirius CEO Mel Karmazin on the speaker lineup.??

NEW YORK - After Wall Street chatter last week about a potential spin-off and deal involving Liberty Media-controlled premium TV firm Starz, at least one analyst says that Liberty chairman John Malone and his team could instead plan to spin off Sirius XM Radio.??

Malone, Liberty CEO Greg Maffei and a range of other executives are scheduled to speak here Thursday at Liberty's annual investor day, which is typically a big draw for analysts and media investors. And Wall Street observers hope for some guidance on Malone's plans for Starz and Sirius, in which Liberty got a stake by helping Sirius out of bankruptcy a few years ago. ??

This year, morning sessions will focus on Liberty Interactive, which is anchored by home shopping network QVC, followed by a focus on Liberty Capital, which includes satellite radio firm Sirius XM, and Liberty Starz. Among the speakers will be Sirius CEO Mel Karmazin and Starz CEO Chris Albrecht.??

Collins Stewart analyst Thomas Eagan said ahead of the Thursday meeting that there are "increased prospects for a Sirius spin." ??Wrote Eagan: "With the Liberty Media Investor Day this week, we thought we'd write about the strategic alternatives we expect the company is considering."

??He suggested that the alternatives revolve around two main options. "One, spinning out the Sirius shares from Liberty Capital into their own security and two, spinning out Liberty Starz into an asset based security." ??Eagan called option one "more likely because it enables Liberty to further monetize its investment in Sirius (without having to increase its stake) and preserves the bulk of the Liberty Starz balance sheet strength for another future transaction."

??A Sirius spin-off would likely be accompanied by a consolidation of the Liberty Starz tracking stock with Liberty Capital, which could disappoint Liberty Starz investors, Eagan said. ??He compared a possible Sirius spin to how the company several years ago spun a stake in satellite TV giant DirecTV into a separate stock and ultimately merged it, tax free, with DirecTV. ??"Should Sirius CEO Mel Karmazin want to "take back" full control of Sirius, he may want to merge with a Liberty Sirius to "take out" Liberty's control," Eagan said. ??

Liberty's Sirius investment has thrown off a lot of money for Liberty. Increasing its stake in Sirius would be a costlier alternative to his scenario though, Eagan highlighted.

??Several analysts have said ahead of Thursday's meeting though that a Starz spin-off could also be in the offing. BTIG analyst Richard Greenfield had said last week that Wall Street reports about a Starz move to raise debt could signal a spin-off plan. "We find it hard to believe that Liberty/Starz would not have outright denied if the story was blatantly false," he said. "It makes far more sense that this was not supposed to be announced until the Liberty Media analyst day."??

Greenfield argued that the likeliest scenario is that "Liberty is preparing to hard-spin Liberty Starz out of Liberty Media, to enable it to be acquired mid-late next year by a larger media entity," such as Time Warner of NBCUniversal.??

Maxim Group analyst John Tinker said this week that "it is unclear to us what Liberty Starz's role is in chairman John Malone's media empire." He argued that "at some point, we believe that the company should be merged into a larger entity."

Email: Georg.Szalai@thr.com

Twitter: @georgszalai