Sirius and XM Plan to Merge


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Washington and New York - Feb 19, 2007 - The rumors are coming true; XM Satellite Radio and Sirius Satellite Radio have entered into an agreement to combine the companies in an all-stock merger of equals. The combined value of the merged company will be approximately $13 billion, which includes net debt of about $1.6 billion.

XM shareholders will receive a fixed exchange ratio of 4.6 shares of Sirius common stock for each share of XM they own. XM and Sirius shareholders will each own approximately 50 percent of the combined company.

Mel Karmazin, currently chief executive officer of Sirius, will become chief executive officer of the combined company. Gary Parsons, currently chairman of XM, will become chairman of the combined company. The new company's board of directors will consist of 12 directors, including Karmazin and Parsons, four independent members designated by each company, as well as one representative from each of General Motors and American Honda. Hugh Panero, the chief executive officer of XM, will continue in his current role until the anticipated close of the merger.

The jointly issued press release touts that the merged company will be able to provide additional choices in program offerings, develop and introduce a wider range of lower-cost listening devices, and in general create a more competitive audio entertainment outlet. In addition, the companies state that the merger will "enhance the long-term financial success of satellite radio by allowing the combined company to better manage its costs through sales and marketing and subscriber acquisition efficiencies, satellite fleet synergies, combined R&D and other benefits from economies of scale."

Terrestrial broadcasters will find comfort in this statement from the press release: "In addition to existing competition from free, over-the-air AM and FM radio as well as Ipods and mobile phone streaming, satellite radio will face new challenges from the rapid growth of HD Radio, Internet radio and next generation wireless technologies." While terrestrial radio stations are concerned about satellite radio stealing their audiences, satellite radio has the same concern.

Karmazin has been open about the possible merger and calls the merger "the next logical step in the evolution of audio entertainment."

The transaction is subject to approval by both companies' shareholders, the satisfaction of customary closing conditions and regulatory review and approvals, including antitrust agencies and the FCC. If approved, the companies expect the transaction to be completed by the end of 2007.

Editor's insight
By Chriss Scherer, editor
Since the introduction of satellite radio, Radio magazine has predicted that the market will not likely support two satellite radio providers, and that a merger or buy-out attempt would not be unexpected. As the companies have announced, there are regulatory hurdles that must be crossed with the SEC, FCC and probably others. FCC Chairman Kevin Martin has already said that he would not allow the two companies to merge, although Martin has defied FCC procedures on other matters, so it's anyone's guess what he will really do.




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