Sirius and XM kissing in a tree, now waiting for regulatory approval |
Today Sirius and XM satellite radio announced a merger:
XM Satellite Radio (NASDAQ: XMSR) and SIRIUS Satellite Radio (NASDAQ: SIRI) today announced that they have entered into a definitive agreement, under which the companies will be combined in a tax-free, all-stock merger of equals with a combined enterprise value of approximately $13 billion, which includes net debt of approximately $1.6 billion.
Unfortunately this won’t happen until the necessary regulatory approval process, which isn’t exactly a slam dunk. If the merger is declared a monopoly the merger will be denied.
From the perspective of somebody who first subscribed to Sirius satellite radio in September, I’m pretty stoked by this announcement, but also disappointed that the necessary regulatory red tape will prevent it from happening by this baseball season. XM has the Major League Baseball contract and Sirius has the NFL. Sirius has Howard Stern and XM has a bunch of others. If the deal goes through then the marriage of the two satellite companies will make one killer satellite package for people who still love radio.
I wonder what happens to the price if/when this deal gets approved? They better not do something stupid like double the subscription prices. Guess we’ll find more details tomorrow during the joint conference call:
The companies will hold a joint conference call and webcast on Tuesday, February 20, 2007 at 8:30 AM ET to discuss this announcement. The conference call can be monitored by dialing 800-573-4840 within the U.S. and 617-224-4326 for all other locations, passcode 29490052. The webcast can be accessed at http://www.sirius.com/ and http://www.xmradio.com/ as well as on their satellite radio services by tuning to SIRIUS channel 122 and XM channel 200.
Hat tip to Gizmodo, the first place I saw the XM press release linked.
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There is no way this merger gets regulatory approval. Both SIRI and XMSR were granted exclusive licenses to use satellites for radio, combining the companies would make a government certified monopoly. There are too many complications for the FCC to ever approve this. This is a just a desperate attempt by both companies to artifically inflate their stock price for another year, while they try and figure out an end game for an industry that’s been overvalued for years. When Wall St figures out that there is no chance of this ever happening, there will be a lot of pain.
Comment by Davis Freeberg — February 22, 2007 @ 8:31 am PST
Never say never, Davis. When the government is involved you just never know.
Comment by TDavid — February 22, 2007 @ 9:07 am PST
Normally, I would agree with you here, but the FCC has a track record of denying these sorts of things and Mel has a track record of using meaningless stunts like these to boost his stocks. Just look at how tough the FCC made the Bellsouth merger and that wasn’t even dealing with a monopoly. Mark my words, a year from now shareholders will be left confused and angry when this whole charade finally blows up. Without the merger chatter, one could easily make an arguement that these stocks should be trading at a 75% discount. Hopefully, I’m wrong and everyone keeps making money, but if investors thought the last year was tough, I think 07′ is going to be even worse.
Comment by davis freeberg — February 22, 2007 @ 3:41 pm PST
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