SIRIUS XM Radio Inc. (SIRI), the largest commercial satellite-radio service operator in the U.S., has decided to enhance its shareholders’ wealth. Yesterday, the Board of Directors of SIRIUS XM has approved a $2 billion common stock repurchase program. Shares of common stock will be purchased from time to time in the open market and in privately negotiated transactions. Additionally, the Board also approved a special dividend of 5 cents per share payable on December 28, 2012 to stockholders of record as of the close of business on December 18, 2012. The special dividend will cost the company about $325 million.
SIRIUS XM maintains its strong performance primarily due to impressive management execution on the back of rising auto industry sales. Management has raised the financial outlook for the rest of 2012 and expects the growth momentum of the company to expand further. Despite price rise of its services, SIRIUS XM maintains its churn rate. Solid conversion rate and an effective marketing strategy helped the company to strengthen its financials.
The biggest beneficiary of this newly initiated share buyback and special dividend will be the company’s largest shareholder Liberty Media Corp. (LMCA). Liberty Media has filed a new application to the U.S. Federal Communications Commission, in which the company stated its intention to acquire more than 50% of SIRIUS XM, so that it can take full control of the Board of SIRIUS XM. At present, it holds 49.8% stake in SIRIUS XM’s total outstanding shares. Liberty Media will participate in SIRIUS XM’s share repurchase program in a way that will not affect its ownership interest.
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