Liberty Media Ranks as Most Profitable Media Company

Takeovers loomed large in SNL Kagan's ranking of the most profitable media and entertainment companies for 2013, with newly consolidated subsidiaries driving a reshuffling of the top companies.

Liberty Media Corp., a company often reshaping itself, saw its fortunes surge in 2013 after a one-time gain associated with its takeover of Sirius XM Holdings Inc.

Liberty Media ended the year with net income of about $8.99 billion, enough to snatch the crown of most profitable media and entertainment company from Walt Disney Co., which came in third also behind 21st Century Fox Inc., according to SNL Kagan data.

Liberty Media recorded a gain of about $7.5 billion in the first quarter of 2013 associated with the application of purchase accounting for its holdings in Sirius XM, according to a Form 10-K. The company obtained a controlling interest in Sirius on Jan. 18, 2013, after purchasing 50 million shares from a financial institution. Previously, Liberty Media had treated its holdings in Sirius as an equity interest.

More recently, Liberty Media indicated it wanted to make Sirius its wholly owned subsidiary — making an offer to Sirius shareholders to convert each share of the satellite radio company's stock to 0.0760 of a share of a Liberty Media series C stock — but later dropped the proposal in favor of a new tracking stock structure.

Maffei (Bloomberg)

Under Liberty Media's new plan, the company would split into two tracking stocks: Liberty Broadband Group, which would include the company's interest in Charter Communications Inc. and Time Warner Cable Inc., as well as unit TruePosition Inc. and certain associated obligations and liabilities; and Liberty Media Group, would include all of the existing company's businesses, assets and liabilities other than those specifically attributed to the Liberty Broadband Group, including the company's interest in Sirius XM.

"Depending on market conditions, we look forward to further discussions with the SiriusXM Special Committee," said Liberty Media President and CEO Gregory Maffei in a March 13 statement, adding, "We remain enthusiastic owners of 53% of SiriusXM."

Wunderlich Securities analyst Matthew Harrigan said that Maffei's comments seemed to suggest Sirius may ultimately reach a deal with Liberty Media Group following the tracking stock split, though the analyst expressed some caution on Sirius following comments at an industry event.

"The best approach may be to isolate the winnings on the Sirius XM deal with the new tracker while raising cable deal capital," Harrigan said in a March 14 research note.