XM Satellite Radio & Sirius Satellite Radio Agree To Merger
XM Satellite Radio and Sirius Satellite Radio Inc. have decided to merge into a single satellite-radio company, the concerns announced today. Now that the inital details have been cemented, the merger still has to get approved by antitrust and communications regulators. Although, rumors of a merger have been circling for some time, The New York Post emphatically stated that the two sides were huddled in discussions throughout the weekend to iron out the details.
The definitive agreement, billed as a “merger of equals,” will be an all-stock transaction valued at approximately $13 billion. Mel Karmazin, currently chief executive of Sirius, would be Chief Executive Officer of the combined company, and Gary Parsons, currently chairman of XM, would be named Chairman. The companies would merge as equals, with both companies getting the same share of the new company. The company would keep offices in both New York, where Sirius is based, and Washington, D.C., home to XM. As of Friday, Sirius carried a market capitalization of $5.2 billion. XM was valued at about $3.8 billion.
Already Federal Communications Commissioner Kevin Martin has signaled some resistance to a coupling of the two services, which feature rival menus of sports, music, and talk-radio programming. However, the radio companies are likely to argue that the marketplace has significantly changed with the addition of competing formats including HD terrestrial radio. A new board will consist of twelve directors, four independent members appointed by each satellite company, and representatives from auto giants GM and Honda.
Under the terms outlined, every XM share will be swapped for 4.6 Sirius shares, and shareholders will own about 50 percent in the combined entity. The group pointed to a closing date at the end of this year, though the aforementioned regulatory hurdles lie ahead, including reviews by the Federal Communications Commission, the Federal Trade Commission, and possibly others. For the time being, both XM and Sirius will operate as independent companies, according to the announcement. More details, including the name of the combined group and its headquarters location, are being ironed out, though additional information will almost certainly emerge this week. Morgan Stanley served as financial adviser to Sirius on the deal, while J.P. Morgan Securities advised XM.