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An investor has sued Sirius XM Radio (NASDAQ:SIRI), accusing the satellite radio operator of not doing enough to resist takeover advances from Liberty Media (NASDAQ:LMCA). The lawsuit by the City of Miami Police Relief and Pension Fund is a reaction to Liberty’s recent assertion that it was edging closer to a 50 percent stake in Sirius, which would help it assume control of the radio’s board.
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Sirius chief executive Mel Karmazin has publicly resisted the takeover, insisting he would not allow Liberty to take control without paying a premium.
However, according to the complaint by the pension fund, there exist provisions that prevent Sirius directors from taking action to stop Liberty from acquiring Sirius stock. The provisions are a breach of the board’s fiduciary duties, the fund alleges in its filing with the Court of Chancery in Delaware because they apply “regardless of whether Liberty’s acquisition poses a threat to Sirius’ non-Liberty shareholders.”
The investor group is seeking compensatory damages and has asked Liberty to stop buying Sirius shares on the open market, according to Reuters. It is also seeking class-action status in the case against the Sirius board. The 13-person Sirius board includes five members who are representatives of Liberty Media.
Last week, the John Malone-led Liberty filed an application with the U.S. Federal Communications Commission to take control of Sirius. The media holding company was given an initial stake in the then in-trouble Sirius in 2009 by the radio in return for a $530 million loan. However, along with the shares, the Sirius board apparently also agreed not to adopt defense measures against a Liberty takeover after a three-year gap. The standstill expired in March.
“Put simply, a board cannot tie its own hands, or the hands of successor boards, in ways that constitute an abdication of their fiduciary duties,” the fund said in its complaint.
Shares of Sirius XM (NASDAQ:SIRI) closed out Friday trading up 1.6% at $2.54.
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