Echostar Corp. is indeed trying to gain control of troubled Sirius XM Radio Inc. by buying the company's debt, according to a Wall Street Journal
report picked up by Bloomberg and others Wednesday.
According to the reports, Sirius CEO Mel Karmazin may face a choice between accepting a capital infusion from Echostar--and giving Echostar CEO Charles Ergen (pictured) control of the company--or bankruptcy. Barron's says existing Sirius shareholders may be left with
little or nothing.
In an
earlier post we reported that other strategic acquirers are considering similar tactics. We'll have more to say on this in an article in The Deal magazine on Feb. 23. But meanwhile, here's a little more insight we've gleaned in our reporting.
It's likely that most serial acquirers with reasonably healthy balance sheets are tracking the financial well being of the targets on their watch-lists. Several we've talked to are contemplating debt-to-own or other tactics in tune with the times.
But since these are not familiar moves for most strategics, they are tough to propose to a board during a period of great uncertainty. Unless, perhaps, you're Charles Ergen, pioneering wheeler-dealer in your field.
If Ergen succeeds, he'll probably make it easier for others to follow suit--though mostly on a smaller scale, we hasten to add. Strategics will also be likelier to move once they get a better sense of how their own businesses are faring in this deep downturn. - Kenneth Klee
Juergen Lasowski
And the winners are...
