XM, Sirius announce merger
jaymack
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http://money.cnn.com/2007/02/19/news/companies/xm_sirius/index.htm?cnn=yesXM, Sirius announce mergerThe two satellite radio operators will combine in a merger of equals following months of speculation.By David Ellis and Paul LaMonica, CNNMoney.com staff writersFebruary 19 2007: 4:48 PM ESTNEW YORK (CNNMoney.com) -- Rivals XM Satellite Radio Holdings Inc. and Sirius Satellite Radio announced Monday they would enter into a merger of equals, creating a satellite radio giant.XM (Charts) and Sirius (Charts) said they would each own half of the combined company, which would have a market value of roughly $13 billion, including approximately $1.6 billion in net debt.Shock jock Howard Stern has been widely credited for much of Sirius's success, helping the satellite radio operator finish 2006 with more than 6 million subscribers.]As part of the deal, XM Chairman Gary Parsons would remain chairman of the combined firm, while Sirius' Mel Karmazin would assume the role of CEO. XM chief executive Hugh Panero will remain as CEO until the merger is completed.The two companies, which have a combined 14 million subscribers, said they had not yet determined a new name for the combined company or where its headquarters would be located."This combination is the next logical step in the evolution of audio entertainment," Karmazin said in a statement.XM shareholders would get 4.6 shares of Sirius stock for each share of XM they own.The deal would value XM shares at $17.02, a 22 percent premium to its Friday closing price of $13.98.The deal would also provide listeners a substantially wider variety of programming. Sirius is currently home to shock jock Howard Stern, while XM boasts a number of shows hosted by high-profile entertainers such as Bob Dylan."The combined company will be better positioned to compete effectively with the continually expanding array of entertainment alternatives that consumers have embraced since the Federal Communications Commission (FCC) first granted our satellite radio licenses a decade ago," Parsons and Panero said in a joint statement.Speculation has run rampant on Wall Street about a possible tie-up between XM and Sirius since the beginning of the year.Both companies, although rapidly growing, have continued to lose money despite strong revenue and subscriber growth.No 'slam dunk'David Bank, an analyst at RBC Capital Markets, said he was not surprised by the deal since the merger makes a lot of sense, but he warned the tie-up was not a "slam dunk."Besides getting shareholder approval, XM and Sirius will also have to get the endorsement of regulators, including the FCC.The National Association of Broadcasters, a trade group that represents local radio and TV stations, urged policymakers Monday to reject the deal, calling it an "anti-consumer proposal.""Given the government's history of opposing monopolies in all forms, NAB would be shocked if federal regulators permitted a merger of XM and Sirius," the trade group said in a statement. "It bears mentioning that regulators summarily rejected a similar monopoly merger of the nation's only two satellite television companies - DirecTV and DISH Network - just a few years back."Bank added that as a condition of the merger the Department of Justice might impose some sort of price caps so that the combined company can't raise monthly subscription rates by a big amount, if at all.Right now, both Sirius and XM have tiered-payment subscription packages, which start at $12.95 per month or $142.45 per year.Calls to both XM and Sirius about what impact the merger would have on subscription rates were not immediately returned.--A member of RBC's Bank's family owns shares of Sirius but RBC does not have a banking relationship with either Sirius or XM.
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NEW YORK, Feb 19 (Reuters) - Sirius Satellite Radio (SIRI.O: Quote, Profile , Research) agreed to buy larger U.S. rival XM Satellite Radio (XMSR.O: Quote, Profile , Research) for $4.6 billion in stock on Monday in a deal that gives all subscribers access to entertainers such as Oprah Winfrey and shock-jock Howard Stern.
The transaction, which faces regulatory scrutiny and objections from terrestrial radio companies, gives XM shareholders 4.6 Sirius shares for each XM share held.
The deal has Sirius paying about $4.6 billion in stock for XM, or a 21.7 percent premium to XM's closing share price of $13.98 on Friday, based on shares outstanding in the latest regulatory filings.
Veteran media executive Mel Karmazin, currently Sirius CEO, will lead the new company as CEO, while Gary Parsons, now chairman of XM, will hold the same position in the new company. It said Hugh Panero, XM CEO, will continue in his current role until the merger closes.
The merger would create a company with about $1.5 billion in 2006 revenue and an enterprise value of $13 billion, including $1.6 billion in net debt.
"This combination is the next logical step in the evolution of audio entertainment," said Karmazin in a statement. He said it will create "unprecedented choice for consumers."
The deal will face tough regulatory scrutiny. The satellite radio licenses prevent one entity from owning them, however Federal Communications Commission Chairman Kevin Martin said last month that its rules are open to change
"I think it's a close call, but more likely than not I think the Justice Department and the FCC approve it," said Blair Levin, an analyst at Stifel Nicolaus & Co. and a former FCC chief of staff during the Clinton administration.
The National Association of Broadcasters, which represents local broadcast radio stations, immediately criticized the tie-up because it would concentrate the licenses into one company and accused them of seeking a government bailout.
"When the FCC authorized satellite radio, it specifically found that the public would be served best by two competitive nationwide systems," said NAB spokesman Dennis Wharton.
"Now, with their stock prices at rock bottom and their business model in disarray because of profligate spending practices, they seek a government bailout to avoid competing in the marketplace," he said.
Does anyone know how to get a station on Sirius? How much is it?
We could all get a station and split it up so everyone gets 1 or 2 hours a week. that would be
i think thats a great idea!! i'm in.