TORONTO — SiriusXM Canada continues to court the favour of its shareholders as it seeks to go private, suggesting on Thursday they can expect higher value for shares than originally proposed, should they vote to support the transaction at a shareholder meeting on August 30.
This comes three days after a group of SiriusXM Canada shareholders holding approximately 8.4 million Class B company shares issued a press release to voice their objection to the company valuation contained in a management information circular issued August 2. In the shareholder group’s view, the proposed privatization of the satellite radio service provider does not reflect fair value.
Under the original privatization proposal put forward by parent company SiriusXM Canada Holdings Inc. (TSX:XSR), its U.S. partner SiriusXM Holdings Inc. (SIRI) offered $4.50 per share cash, SIRI shares or Canadian shares exchangeable into SIRI shares, representing a total transaction consideration of approximately $351 million, which in turn represents a premium of 22.3% to SiriusXM Canada’s unaffected closing share price on February 11, 2016.
On Thursday, SiriusXM Canada issued a press release announcing that two of its largest shareholders, Slaight Communications Inc. and the CBC, have confirmed they intend to vote in favour of the company’s privatization and will elect to receive solely cash consideration in the pending recapitalization of the company. Slaight and CBC collectively own approximately 22.5% of the outstanding shares of the company on a converted basis, SiriusXM Canada said, adding that their election to take 100% cash could result in a potential increase in share value for minority shareholders.
“As a result of this cash election, the total transaction consideration that may be paid, at the election of shareholders, in the form of shares of SiriusXM Holdings Inc. (SIRI) whether directly or indirectly through shares exchangeable for SIRI shares will increase to approximately 74% from approximately 50%. This would represent a current value of approximately C$4.83 per Class A Share if all remaining shareholders elect the maximum SIRI share consideration (approximately 74% in SIRI share consideration and approximately 26% in cash consideration),” SiriusXM Canada wrote in its press release.
“The current value of approximately C$4.83 per Class A Share is based on yesterday’s closing price of US$4.21 per SIRI share and the Bank of Canada noon exchange rate of C$1.306 per US dollar, and the fixed exchange ratio of 0.898 SIRI shares and cash consideration of $4.50 per Class A Share under the plan of arrangement. The current value represents a premium of approximately 31% to the unaffected closing price of C$3.68 per Class A Share on the TSX on February 11, 2016 (the date prior to the company’s announcement that it had been approached regarding a potential corporate transaction). The price per SIRI share and the US dollar exchange rate are both subject to change,” SiriusXM Canada said.
In its press release, SiriusXM Canada responded to the shareholder group’s previously stated objections to the proposed recapitalization of the company, saying “it strongly disagrees with the recent press release issued by certain dissident shareholders which makes claims that the company believes are entirely without merit and mischaracterizes important facts and circumstances underlying the transaction,” the company wrote, defending the company valuation done by Ernst & Young and the fairness opinion of National Bank contained in the company’s management information circular.
“[B]ased on the independent work of each firm, both arrived at the same conclusion: the transaction is fair from a financial point of view to minority shareholders,” SiriusXM Canada concluded.
