DOJ Taking Time To Rule On Possible Liberty-iHM Deal

U-S Department of Justice antitrust division officials have raised an eyebrow over plans by John Malone’s Liberty Media to acquire iHeartMedia, which owns 858 broadcast stations, reports The NY Post citing sources.

Lawyers for Justice are scheduled to delve into the potential anti-competitive implications of a merger in greater detail in January and February, sources said.

Earlier this month, Liberty sought DOJ’s blessing to buy iHM in recent weeks through a plan to grow its current 4.8 percent stake, according to a report in The Wall Street Journal.

The Justice Dept.’s biggest concern is likely focused on the potential for reduced competition between SiriusXM and iHeartMedia if they merge, said Holland & Knight lawyer David Kully, who oversaw radio mergers for the Department from 2013 through 2016.

iHM’s current owners have an incentive to invest in the stations to compete with Sirius, Kully explained. But if Sirius and iHeart were to be owned by the same company, the new owner could have less incentive to throw funds at the broadcast business, which makes its money from advertising, as unhappy broadcast customers may simply jump to Sirius, which charges a subscription fee, he said.

SiriusXM recently acknowledged that traditional radio is a threat. “The availability of traditional free AM/FM radio may reduce the likelihood that customers would be willing to pay for our subscription services and, by offering free broadcasts, it may impose limits on what we can charge for our services,” the company said in its 2019 annual report.

Liberty’s Sirius has not yet made an offer for iHM. iHeart’s three largest shareholders, who control about 50 percent of the stock, are expected to demand more than $20 a share, the source said.

Even if Justice officials find issue with a Sirius/iHM merger, the agency might OK it anyway given the growing threat of streaming music and podcasts to both companies, a source close to Liberty said.