Solid quarterly earnings at Sirius XM Canada Holdings Inc. are fuelling minority shareholder concerns that a proposal to take the satellite radio business private low-balls the company’s true value.

The offer of $4.50 per share in cash or stock, first announced in mid-May, has faced pushback from some minority shareholders, who will vote on the proposal at the end of August – which is later than expected.

Late Wednesday, Sirius XM Canada reported third-quarter earnings that were largely in line with or ahead of expectations, including a 3.5 per cent increase in revenue to $86-million and a 3.5 per cent increase in total subscribers to 2.75 million. Earnings were $7.2-million, or 6 cents a share, down 9.3 per cent year-over-year.

The company said it will release an information circular with further details on the proposed transaction no later than Aug. 4, ahead of a minority shareholder vote scheduled for Aug. 30.

On a conference call with analysts on Thursday, Mark Redmond, president and CEO of Sirius XM Canada, said the delay has been “all about the complexity of the transaction and nothing more.”

“We are confident that this transaction will maximize value for all stakeholders involved,” Mr. Redmond said, noting that the company’s board of directors and a special committee of the board overseeing the proposal recommend that shareholders approve it.

Sirius XM Canada’s shares were trading at $4.59 near midday Thursday on the Toronto Stock Exchange. The $4.50 per share offer was calculated as a 22.3-per-cent premium on the company’s Feb. 11 share price, just before The Globe and Mail first reported plans to take the company private at a tentative price of $4.25 per share.

Yet the company’s solid third-quarter results are only adding to frustration among shareholders who feel the company’s offer is unfairly low. Sirius XM Canada reported free cash flow of $12.6-million for the third quarter, raising further questions about its decision to halt dividend payments pending the outcome of the privatization plan.

“Free cash flow is strong, so suspending the dividend was totally unjustified,” said Stephen Takacsy, chief investment officer at Montreal-based Lester Asset Management, which owns nearly a million shares in Sirius XM Canada. “The transaction isn’t done yet and it’s still our company, so public shareholders should still get their dividends.”

Three other institutional shareholders have expressed serious concerns about the deal to The Globe, including Van Berkom and Associates Inc., a large minority shareholder that thinks the offer undervalues Sirius XM Canada “by a wide margin.”

Under the proposal, two of the largest Canadian shareholders – Slaight Communications Inc., which was built on radio assets, and Obelysk Media Inc., owned by Canadian businessman John Bitove – would each acquire 33.5 per cent of voting shares and 15 per cent of the company’s total equity. Sirius XM Holdings Inc., an American company that owns the Sirius XM brand in the U.S. as well as 32 per cent of the Canadian company, would own the rest of the equity.

The company’s other major shareholder, the Canadian Broadcasting Corp., plans to sell its 12.5-per-cent stake, worth about $58-million at $4.50 a share.

If the transaction is approved, minority shareholders can accept $4.50 per share in cash, or take shares in the U.S. Sirius XM.

On Thursday’s conference call, TD Securities Inc. analyst Vince Valentini noted that the American Sirius XM’s share price is up 5 per cent since the transaction was announced in May, and equity markets have been “pretty buoyant” of late.

“Is there any possibility that better equity valuations … could be reflected in the takeover value in reopened negotiations?” Mr. Valentini said.

“I don’t see any reopening of this transaction at all,” Mr. Redmond replied.

Relations between the Canadian Sirius XM and the U.S. parent company have at times been strained, most notably over a year-long dispute over activation fees from subscribers.

The proposed transaction needs the support of two-thirds of Sirius XM Canada shareholders, and a majority of minority shareholders, excluding Slaight, Obelysk and the American Sirius XM. The CBC is expected to support the proposal. But with some institutional shareholders still fuming, the vote could be close.

“We are still skeptical of passage given our expectation of an overwhelming majority of institutions voting against the deal,” said Aravinda Galappatthige, an analyst at Canaccord Genuity Group Inc., in a research note. “Hence much depends on the retail votes.”

The proposal also needs approval from the Canadian Radio-television and Telecommunications Commission. Sirius XM Canada completed its filing to the CRTC on May 27 and is awaiting word from the regulator.

“I would hope that the CRTC and our Heritage Minister, Melanie Joly, are looking very carefully into how Canadian shareholders are being treated,” Mr. Tacaksy said.