http://money.cnn.com/2007/02/19/news/co ... 2007021914


XM, Sirius announce merger
The two satellite radio operators will combine in a merger of equals, leaving Parsons as chairman and Karmazin as CEO.
February 19 2007: 4:11 PM EST


NEW 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.

XM shareholders would get 4.6 shares of Sirius stock for each share of XM they own.

"This combination is the next logical step in the evolution of audio entertainment," Mel Karmazin, CEO of SIRIUS Satellite Radio said in a statement.

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.

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.

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."


OK, Who are the stock trading geniuses on RM? Is this a good buy to get in on?

If the SEC doesn't block this, they are an irrelevant institution.

This was inevitable. They've both been bleeding money since day one competing against each other. Should be interesting to see how they fair as a giant.

That was my first thought as well, but all the same I wouldn't be surprised at all to see it go through

I'm not a stock genius, but this would be a good time to get in on shares of XM. XM is essentially purchasing Sirius and, according to the press release, "Under the terms of the agreement, XM shareholders will receive a fixed exchange ratio of 4.6 shares of SIRIUS common stock for each share of XM they own."
With the completion of the merger to take place later this year, it is reasonable to expect the price of the stock (XM specifically) to go up. The caveat is whether or not the government will allow the merger (remember that Direct TV and Dish Network had agreed to a merger, but the government said no to it). So if you do buy, expect fluctations due to rumors in regards to what the government will do and dump it all fast if the government says no if you want to hold onto whatever you make from the time you buy until the announcement. If the government agrees to it, the merger will put both companies in the black and I would assume a good forcast for the business as a single entity.

Would this be something that the FTC would block, or possibly the FCC?

FTC, yes. I think that's who I meant. FCC is too concerned with whether anyone says the word "shit", and I don't think it's their job to prevent monopolies from forming.

This is gonna be my new username.

2 underperforming companies merging to form one large underperforming company.

I don't particularly see why this merger wouldn't be in the interests of consumers. Hell, I'd go so far as to say if you have XM or Sirius, you probably are already a chump. XM radio is, as far as I can tell, a luxury item with limited utility, and as such any 'harm', if there were to be any from this merger would be limited to those who have many alternatives at their disposal.

Just as long as I can get Howard every morning and replays on the weekends, I don't give a fuck what they do.

My old man has a bunch of Sirius stock, I believe. What's this mean for him?

I never bought a satellite radio because XM had all the sports I wanted and Sirius had Howard. If this goes down I am sure I will be buying.

XM and Sirius Satellite Radio to combine
AFX Europe Focus
20 February 2007


NEW YORK (AP) - Federal regulators warn that combining rivals Sirius Satellite and XM Satellite Radio will be a tough process, since there's already a provision barring both satellite radio licenses from being owned by the same company. Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. announced an agreement to combine on Monday in a move aimed at reducing costs. Shares of both companies rose sharply in early trading on Tuesday. The Federal Communications Commission will evaluate any proposed transaction to see if it's in the public interest, FCC Chairman Kevin Martin said following the announcement, adding that: "The hurdle here, however, would be high as the commission orig inally prohibited one company from holding the only two satellite radio licenses. "The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices," Martin said. The FCC already has a provision in place specifically barring both satellite radio licenses from being owned by the same company. XM and Sirius have racked up significant financial losses to subsidize new subscribers even as they escalated an arms race to lock in long-term programming deals. Sirius signed a five-year, $500 million deal in 2004 with the shock jock Howard Stern, w hile XM paid $650 million for an 11-year deal with Major League Baseball. XM signed a three-year, $55 million deal with Oprah Winfrey. A major rationale for combining the two companies would be to save costs. Mel Karmazin, the CEO of Sirius who will become CEO of the new company, declined to comment in an interview about how much the companies hoped to save by the merger. He said he was optimistic about achieving regulatory approval, but acknowledged: "We understand that there's a lot of work to be done." Investors and analysts have been speculating about a deal for months, and are hoping that the cost savings that would result would give the companies a boost amid softening retail demand. Both services offer dozens of channels of talk and commercial-f ree music for monthly fees of about $13. XM radio receivers can't receive signals from Sirius, and vice versa. But Karmazin and Parsons said in an interview that the companies are working on developing a receiver that could receive both signals. In the meantime, they said, assuming the deal goes through, the companies would make other arrangements to bring programming that's currently exclusive to one provider to listeners of the other, such as getting Major League Baseball games -- currently only available on XM -- to Sirius listeners. The companies billed the deal as a merger of equals, with shareholders of both companies owning approximately 50 percent of the combined company. However, Karmazin will run the combined company and XM's CEO Hugh Panero will stay on only until the deal is closed. XM Chairman Gary Parsons will remain in that role. XM shareholders will receive 4.6 shares of Sirius stock for every share they own, valuing the company at $4.57 billion or $17.02 per share based on Friday's closing price for Sirius shares. That gives XM shareholders a premium of 22 percent to the $13.98 closing value of their stock on Friday. XM's shares jumped $1.52 or 11 percent to $15.50 in early trading Tuesday on the Nasdaq stock market, while Sirius' rose 23 cents or 6 percent to $3.93, also on the Nasdaq. A combination would also have to meet antitrust approval from the Department of Justice. The companies are expected to argue that they compete not only with each other but also with traditional radio and a growing base of digital audio sources such as iPods, mobile phones and non-satellite digital radio. It's too early to say what the deal might mean for subscription prices. The merger could bring down the cost of providing service, but at the same time give the company more pricing power as the only U.S. satellite radio provider. Neither XM nor Sirius have reported a profit yet. Both stocks declined more than 40 percent last year on concerns about their continued growth in subscribers, but investors have held out hope of a merger. The combined company would have had about $1.5 billion in revenues in 2006 and about 14 million subscribers, they said. The companies said they would work together to decide on a new name and also to determine where it would be based. XM is based in W ashington, while Sirius is based in New York. The new company's board will have 12 members, including Parsons, Karmazin, four independent directors named by each company, and one representative each from General Motors Corp. and Honda Motor Co. News of a possible merger was reported earlier Monday by the New York Post. On Friday, a Bear Stearns analyst said in a research note that a merger would have a good chance of overcoming regulatory obstacles. Other analysts remain less sure. Sanford C. Bernstein analyst Craig Moffett said he gives the deal a "50-50" chance of passing regulatory muster. Moffett said the deal could have a particularly tough time getting through the FCC, and said it was "anyone's guess" as to whether the FCC would change its rule barring a consolidation of the two satellite radio companies. A group representing radio companies, the National Association of Broadcasters, put out a statement Monday urging federal regulators to block the satellite radio deal.

Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

I thought they had a good argument that FM, AM, Internet radio, and podcasting all offered viable competition for satellite radio, so even if there is only one satellite radio company, it's not a monopoly.

I feel comfortable with that, but I guess it won't blow my brain regardless of how this works out.

as long as they don't get any great XM idea to add tons of commercials and the "tiered" fees for "premium" programming that i heard they toyed with...

If they add commercials, why would anyone pay for it? You can listen to commercials on FM.

They do have a good argument, because technology (i.e. internet radio, podcasting, etc) was not prevalent back when satellite radio came into existence.

XM and Sirius have a seperate argument to make, and that is that if they remain as seperate entities, it is highly likely that one of them will go bankrupt (the balance sheets of both companies are nightmares) and the public would end up with a monopoly by default. Of course this is the weaker argument, but it will bear some weight in their quest for approval.

Still, it will be interesting to see if this is given the government's blessing. Direct TV and Dish Network tried to merge years ago, but the DoJ stepped in on the basis that cable was not available everywhere, so a monopoly would exist for some (not that cable hasn't operated as a monopoly for years and is fighting to keep Verizon's FIOS TV out of neighborhoods). I don't see how the same argument could be made in regards to this media, but you never know.

XM didn't "add" tons of commercials.
Clear Channel was an initial investor in XM, which gave them some rights to program a couple of channels. I believe XM fought a very expensive legal battle to not allow those Clear Channel run stations to play commercials, and ultimately lost the legal battle... So they responded by adding 4 new stations with similar play lists to in essence replace the content of those stations.

and they HAD premium channels- initially playboy, and then O&A for all of 6 months... There are no longer premium stations on XM, and there havent been for nearly 2 years.

Me, id prefer an ala carte style purchase plan, as long as its truely ala carte. That way im not stuck with 5 latin pop stations, a bunch of country, stern, CNN simulcasts and Nascar.

they came to their senses? great. now just get rid of the commercials and they will be close to as good as sirius.