Owners of Sirius XM Canada are planning to take the company private in a deal that would value the satellite radio provider at close to $750-million, according to a source familiar with the proposed transaction.
The deal could see American company Sirius XM Holdings Inc., which operates the U.S. arm of North America's dominant satellite radio brand and owns roughly 32 per cent of the Canadian company, join forces with Canadian owners to buy out the more than 30 per cent of 105 million outstanding shares that are publicly held.
The buyout price would be $4.25 a share in cash, and the valuation would include about $192-million in debt.
Reached by telephone, Sirius XM Canada president and chief executive officer Mark Redmond said, "I don't have any comment." A spokesperson for U.S.-based Sirius XM Holdings did not respond to a request for comment on Thursday.
On Friday, Sirius XM Canada Holdings Inc. released a statement at the request of regulators, confirming that the company "has been approached on a preliminary basis regarding a potential corporate transaction. The Company has not received a binding proposal and is in early stage discussions as to the viability of such potential transaction."
In addition to the 32-per-cent American-owned stake, Sirius XM Canada Holdings Inc. is controlled by a group of shareholders, including Canadian Broadcasting Corp., which owns 12.5 per cent; Slaight Communications Inc., a company built on radio assets, with a 10-per-cent stake; and Obelysk Media Inc., a company owned by Canadian businessman John Bitove, which has 7.5 per cent.
At least one of the Canadian owners could be bought out as part of the deal, the source said.
"The complication here is that Sirius XM's (US) ability to increase their control is capped by the foreign ownership rules," said Aravinda Galappatthige, an analyst at Canaccord Geunity Corp., in a research note released Friday morning. "While the multi-class voting share structure can provide some incremental room, it can only go so far."
Sirius XM Canada has about 2.7 million users in Canada and has been growing steadily, adding 14,000 paying subscribers in its last quarter, despite stiffer competition from online streaming alternatives. But it has seen its average revenue per user flatten of late, and its stock price has fallen roughly 40 per cent over the past year, to $3.68 at Thursday's close on the Toronto Stock Exchange.
The company has built its brand by offering exclusive content for $15.99 per month, including shows from talent such as Howard Stern, across 120 channels with genres ranging from curated music to news, live sports, talk shows and other entertainment. Most of the content is licensed from the U.S-owned company.
In the first quarter of 2016, Sirius XM Canada reported $83.5-million in revenue, up nearly 6 per cent year-over-year. It also recorded $10-million in profit, which was up more than 25 per cent over the same quarter in 2015.