(CN) - Shareholders cannot sue Liberty Media for taking majority control of Sirius XM Radio three years after it injected half a billion dollars to prop up the struggling satellite radio company, a judge ruled.
Sirius XM Radio had been in desperate financial straits when it negotiated a $530 million capital infusion from Liberty Media Corp. in 2009.
Its stock was trading below 15 cents a share, and it did not have the money to pay certain outstanding notes that required immediate repayment, the Delaware Chancery Court noted.
The deal gave Liberty Media a 40 percent equity interest in exchange for its investment but put a three-year hold during which Liberty could not acquire any more Sirius stock.
By the time Liberty had access to Sirius shares on the open market in 2012, however, things had turned around for the satellite maven.
Its shares were then trading at more than $2 a share, but Liberty was able to take control of the company without paying shareholders a premium, or allowing them to vote on the deal.
Shareholders filed suit , but Chancellor Leo Strine ruled Friday that the suit was untimely since it was filed more than three years after the terms of Sirius' deal with Liberty were publicly disclosed.
"Reasonable Sirius stockholders were on full notice in 2009 that Liberty Media would be able to acquire majority control without interference from the Sirius board after the standstill period expired in 2012," the ruling states. "The plaintiffs have identified no reason why they did not challenge the investment agreement within the required limitations period, nor have the plaintiffs identified any action the board could have taken to block Liberty Media that was not specifically foreclosed by the investment agreement."
It is also undisputed that Liberty Media put $530 million at risk by investing in Sirius, and now has the contractual right to benefit from its favorable terms, the chancellor found.
"At a time before it had any influence over Sirius, much less any fiduciary obligation to it, Liberty Media gave valuable consideration in exchange for the right to make open market purchases after the standstill period expired. Liberty Media's decision to do so, without more, provides no basis for a cause of action against it," the 24-page opinion states.
Strine noted that "nothing in life is free, and particularly not capital infusions into public corporations."
Given this maxim, "the plaintiffs are not entitled to watch Sirius take over half a billion dollars in capital from Liberty Media, sit on the sidelines benefitting from the investment Liberty Media made in Sirius until after the statute of limitations expires, and then belatedly seek to deprive Liberty Media of the benefits of the contract it received in exchange," he said.