It looked like the Sirius XM Holdings Inc. (NASDAQ: SIRI) buyout was suddenly having problems as recently as last week. That may no longer be the case. What investors need to know is that the merger is not really a good deal for them. They also need to know that the vote is likely to work against what is better.

John Malone of Liberty Media Corp. (NASDAQ: LMCA) likely will win in the $3.68 per share buyout. By our take, investors should be getting well over $4.00 here. In fact, the consensus price target is up at $4.40, and the highest price target is above $5.00 per share. As a reminder, the consensus price target when the deal was announced was $4.60 per share.

Back on January 24, Sirius XM announced that the Special Committee of its board of directors retained Evercore Group as its financial advisor and Weil, Gotshal & Manges to act as its legal counsel to help with its evaluation of Liberty Media’s offer.

Sirius XM’s Special Committee is comprised of independent directors not affiliated with Liberty Media. Here was where the January 24 announcement became interesting: the special committee authorized Sirius XM to enter into an agreement with Liberty Media to defer the previously scheduled $240 million repurchase of shares of Sirius XM common stock from Liberty Media from January 27, 2014, to April 25, 2014. This was the date of the final installment of share repurchases from Liberty Media. As a result of this deferral, Sirius XM will repurchase $340 million of its shares of common stock from Liberty Media on April 25, 2014, at a price of $3.66 per share.

So, John Malone and Greg Maffei of Liberty are getting $3.66 per share in a buyback if it occurs. They are willing to pay $3.68 per share, a deal that will give Liberty that much more free cash flow to finance other transactions — likely in cable.

Sirius XM shares dropped to $3.35 as recently as last week, but now the stock is magically back up to $3.53. This still leaves a merger arbitrage, short of any share price conversions that is, of about 4.2%.

The highest that Sirius XM shares have traded in 2014 is $3.89. The stock might or might not be higher than that on its own without the buyout offer. It seems that there is a sense that Malone and Maffei will win the deal here. Whether they should is another issue, at least to us.

Will this deal happen? Stay tuned, because it is complicated.

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