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Liberty Media Corp. ( LMCA ) recently expressed its desire to take full control of SIRIUS XM Radio Inc. ( SIRI ), the largest satellite radio entertainment provider in the U.S. At present, Liberty media holds approximately 53% of SIRIUS XM. The new proposal will give Liberty Media a 100% stake and consequently SIRIUS XM will become a wholly owned subsidiary of the former.

Per the deal, in a tax-free transaction, each share of SIRIUS XM will be converted into 0.076 shares of a new issue of Liberty Media Series C common stock. The existing Series A and Series B shareholders of Liberty Media will get 2 shares in the Series C stocks for each share they possess.

After the completion of the whole transaction, the existing minority shareholders (excluding Liberty Media) of SIRIUS XM will control approximately 39% of Liberty Media. The deal is subject to the approval of a special committee of independent directors and public stockholders of SIRIUS XM, other than Liberty Media.

The decision to acquire a 100% ownership in SIRIUS XM is viewed as Liberty Media's attempt to consolidate its position in the U.S. cable TV industry. The company currently controls a 27.3% stake in Charter Communications Inc. ( CHTR ), the fourth largest pay-TV operator in the U.S.

Liberty Media is aggressively pursuing an idea so that Charter Communications can acquire Time Warner Cable Inc. ( TWC ), the second largest cable MSO (multi service operator) in the U.S. However, Charter needs to raise at least $25 billion for this takeover, which will significantly leverage the company's balance sheet. In that case, Liberty Media may need to inject funds for Charter Communications.

A full control of SIRIUS XM will immediately raise Liberty Media's market capitalization to approximately $27 billion from the current level of about $16 billion. Similarly, annual EBITDA (earnings before interest, tax, depreciation and amortization) of Liberty Media will jump from $1.4 billion to around $2.6 billion. Liberty Media will also gain approximately $625 million of annual free cash flow of SIRIUS XM.

Currently, both Liberty Media and Charter Communications carry a Zacks Rank #3 (Hold) while both SIRIUS XM and Time Warner Cable carry a Zacks Rank #2 (Buy).

CHARTER COMM-A (CHTR): Free Stock Analysis Report

LIBERTY MEDIA-A (LMCA): Free Stock Analysis Report

SIRIUS XM HLDGS (SIRI): Free Stock Analysis Report

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Liberty Media to Fully Control SIRIUS XM - Analyst Blog