XM Sold to Sirius in $4.6 Billion Stock Deal

Demiurge

Sirius to buy XM in $4.6 billion stock deal
Mon Feb 19, 2007 6:34 PM ET

NEW YORK (Reuters) - Sirius Satellite Radio agreed to buy larger U.S. rival XM Satellite Radio 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.

(additional reporting by Jeremy Pelofsky)

Link

sucks2beme

Stern and Winfrey? Gag.
So now my XM price will shoot up $5 a month to support this crap?

Demiurge

sucks2beme wrote:

Stern and Winfrey? Gag.
So now my XM price will shoot up $5 a month to support this crap?

If you continue to use the service....

Refefer

Been calling it for well over 2 months now. Definately glad I didn't jump the gun and pick one or the other.

Strong Bad

I paid for a year of XM service that is up in June. I wonder how they will handle station programming that obviously overlaps as well as people with XM receivers picking up the Sirius signal (and vice versa).

Both sets of programming in one package, I like it!

This is very good for Polk as it opens up a much larger customer base to sell their home Receiver.

exalted512

...waiting for the price increase now...
-Cody

Demiurge

Generally a monopoly means higher prices. The implications are a lot deeper than just a larger audience. In order to maintain the audience you need to keep the costs low enough to offset the temptation to move to more appealing avenues of entertainment.

Dennis Gardner

Strong Bad wrote:

I wonder how they will handle station programming that obviously overlaps as well as people with XM receivers picking up the Sirius signal (and vice versa).

Nothing changes unless you purchase a new dual band receiver that will become available with both sets of programming. My guess is subs will run probably $20/mth.

No way they let you have both with no increased $$$.

RuSsMaN

Satellite is for chumps. Internet Radio is where it's at.

disneyjoe7

I wonder if the channel quality will go down as they add channels to their line up?

avguytx

Do what I do and don't subscribe to either! lol

bobman1235

It's not REALLY a monopoly. Their argument is that they don't as much compete with each other as with terrestrial radio, iPods, etc, and they're mostly right. Satellite radio is marginally popular, but not NEARLY popular enough to raise prices and expect to continue to grow. I don't do satellite radio because it never seemed worth the monthly cost to me. They could raise their prices to whatever they want, doesn't affect me.

I don't see why you'd need a dual-band receiver to receive both of their station sets - if they WANTED to merge them, they could just broadcast all stations on both bands. In theory. Nothing says they're going to do that.

polksda

RuSsMaN wrote:

Satellite is for chumps. Internet Radio is where it's at.

And I get internet radio in my car how?

disneyjoe7

polksda wrote:

And I get internet radio in my car how?

Lots of LAN cable or Wi-Fi if you keep it parked in your driveway

polksda

disneyjoe7 wrote:

Lots of LAN cable or Wi-Fi if you keep it parked in your driveway

Good point... would save a lot in gas costs too.

exalted512

Dear XM Radio Subscriber:

We want to share with you some exciting news: Yesterday, in Washington DC, we announced XM Radio will be merging with Sirius Satellite Radio to form the premier digital audio service.

The merger will create a satellite radio company that will provide consumers across the country with more and better premium radio programming. The combined company will be able to compete better in what has become a very complex and dynamic entertainment market.

Where today our exclusive contracts mean you had to choose between baseball and football or Oprah and Martha Stewart, the new company will seek to ensure that in the future, you will be able to access both companies' programming. And, once we are fully integrated, those of you who have factory-installed satellite radio will no longer be limited to the programming provided by the exclusive satellite radio service chosen by their car manufacturer.

This merger should be completed in late 2007 or early in 2008. Throughout the year, we will provide updates on how the merger is progressing and information will be available at our website, www.xmradio.com.

Between today and the merger date, as well as during the period immediately after the merger date, all of your services will remain the same. The channel lineup, the customer service number, the great music technology, and the XM Radio web site will all remain unchanged and there will be no disruption to service. But, if you have questions, information will be available and maintained on our website, and you can contact our Listener Care team at 800-XMRADIO, with questions and concerns.

XM Radio continues to be committed to providing you the highest quality audio entertainment and customer service available today. After the merger, our new company will be able to offer you the most exciting listening experience in radio.

Sincerely,

Hugh Panero
CEO, XM Satellite Radio


-Cody

Jstas

Don't count your chickens before they hatch.

An excerpt from Yahoo News:

...The deal faces substantial obstacles in Washington, including a
Federal Communications Commission provision that specifically forbids the two companies to combine.

Analysts have noted that the FCC could change the rule, but in a statement late Monday FCC Chairman Kevin Martin said that the "hurdle" would be "high" to prove that the deal would be in the public interest.

"The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices," Martin said.

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....



Which basically means that the government can still block this and judging by past performances of similar services when Dish TV and DirecTV tried to merge a few years ago, this ain't gonna happen.

bobman1235

I just don't undersatnd how you could possibly lump this in with antitrust. Satellite radio does not define the marketplace. And from the state of both company's finances, if this deal doesn't go through, in the next couple of years the consumer won't have any choice because neither company will exist, because they're going bankrupt.

McLoki

RuSsMaN wrote:

Satellite is for chumps. Internet Radio is where it's at.

I agree, but the cord kept getting pulled out of the wall as I backed my car out of the garage. (guess I need a longer cord - maybe a spool of cat-5 connected to my trunk....)

Michael

Jstas

bobman1235 wrote:

I just don't undersatnd how you could possibly lump this in with antitrust. Satellite radio does not define the marketplace. And from the state of both company's finances, if this deal doesn't go through, in the next couple of years the consumer won't have any choice because neither company will exist, because they're going bankrupt.

Satellite TV was in the same boat a few years ago and the government still blocked the merger but both are still around. Are they thriving? I don't know. But everyone I know who has satellite radio loves it and there are a ton of subscribers who subscribe for Howard Stern alone. As long as Stern is there, I don't see Sirius going anywhere. I see the service going to ads to increase revenue just like cable did but I don't think they are going anywhere, merged or not.

Demiurge

It is a monopoly, but I appreciate the semantics.

The biggest competition to satellite radio isn't one another, it's simply people not buying satellite service period.

There isn't a reason for government to break up the merger of 2 failing companies.

Rivrrat

If I spent more time driving. I'd have satellite radio, my commute is 20 mins each way, and I can't justify the sub fees for that. I expect most people are in the same situation, and since I already get 50 some XM channels at home through DirecTV, so as far home goes I won't bother.

I don't see the format ever doing much more than it is now.

steveinaz

XM raised prices once already, they go up again and I'll cancel. just that simple.

Strong Bad

polksda wrote:

And I get internet radio in my car how?

Think outside the box man! Buy a decent laptop for about $600-$700, then get a wireless aircard with service from Cingular, Sprint or Verizon and connect to the internet that way. Sit the laptop on your passenger seat and rock on!

It'll cost a shitload more money a month, but atleast you won't be a chump!

Demiurge

Strong Bad wrote:

Think outside the box man! Buy a decent laptop for about $600-$700, then get a wireless aircard with service from Cingular, Sprint or Verizon and connect to the internet that way. Sit the laptop on your passenger seat and rock on!

It'll cost a shitload more money a month, but atleast you won't be a chump!

Where do you think that signal comes from?

Although, you're onto something with the comment. It'll be the phone and cable companies that will be offering all access instant download content in cars. XM and Sirius have completely cornered themselves into radio broadcasts.

bobman1235

Jstas wrote:

there are a ton of subscribers who subscribe for Howard Stern alone

People with that low an IQ deserve to be screwed out of their money.

Jstas wrote:

As long as Stern is there, I don't see Sirius going anywhere.

While it's true that Stern brings in numbers for them (or brought in, at least), I don't see how you can make that statement. They brought Stern in, what, two years ago? He may be keeping existing fans, but he's definitley not dragging any new ones in. In those two years, Sirius has still yet to turn a profit. So how long can they survive if their numbers continue like they are? Stern has been successful for them compared with NOT having him, but that doesn't mean they're not in the red.

Demiurge wrote:

It is a monopoly, but I appreciate the semantics.

The biggest competition to satellite radio isn't one another, it's simply people not buying satellite service period.

While I suppose for the technical definition of a monopoly, it is a monopoly, in the SPIRIT of monopoly laws, it isn't one. Yes, it is one company that completely controls a certain market. But it isn't a competitive market, and having one company control it doesn't necessarily hurt the consumer in that it's a completely reasonable alternative to just not purchase the service.

The only time Monopoly laws should really come into play is if a company has created a market that is essentially a necessity, and people do not have any other options. Back when the Bells were broken up, the only way to get phone service was through a local phone company (pre-cell phone, internet phone, etc). One company controlled that necessary service, and was therefore a monopoly. THey could have charged exorbitant prices and people would have been forced to pay, because there was no alternative.

I think as long as you can prove that if the "monopoly" in question were to raise prices, people would just not pay said company and not be put through any particular hardship because of it, the government should not be able to intervene.

brettw22

http://radio.about.com/library/weekly/aa073003a.htm

There's something else that I've seen before that I can't find now but the source for the streaming internet is definitely by way of the cell companies, but the avg data rate per month is about $70.........

G-2

No offense to anyone using Sat R, but can't you load an iPod with all YOUR favorites and listen to it for free, I'd imagine that most of us have large library's (we have over 2K cd's). Just some food for thought...