With not a day to spare before Sirius XM's $171.6 million debts were due, Liberty Media Corporation, owner of DirecTV, swooped in and aided the ailing satellite radio company.
Sirius XM will get $250 million today for paying its immediate debts, plus an additional $280 million investment. In turn, Liberty will get a 40 percent stake in the company and seats at the board of directors. Shares jumped by 71 percent after the news broke this morning.
"This agreement enables Sirius XM to continue to develop the opportunities first outlined in the merger of Sirius and XM," CEO Mel Karmazin said in a press release. "By strengthening our capital structure and enhancing our financial flexibility, this investment allows us to continue providing the great content and innovative programming our subscribers know and love." Creditors previously told the Wall Street Journal that they'd try to oust Karmazin if the company filed for bankruptcy.
Today's deal could be considered a slap in the face to Charlie Ergen, chairman of the Dish Network and owner of the set-top box maker EchoStar. He was negotiating to bail out Sirius XM even though he and Karmazin don't get along. (Reportedly, when Karmazin headed Viacom, Ergen pulled Nickelodeon and MTV from the Dish network over a contract dispute and posted Karmazin's home phone number on the unavailable channels.)
Businessweek suggests that Ergen needed Sirius XM to take the focus off the Dish Network, which is losing its fight with DirecTV. If that's true, the Liberty deal is a crushing blow, as the company will no doubt cross-promote satellite radio and television to pull in more subscribers.
