Radio Rivals XM, Sirius Agree To Merge
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XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc., rivals in the fledgling satellite radio industry, have agreed to combine in a deal that investors hope will result in lower costs, assuming it overcomes significant regulatory hurdles.
The companies billed the deal announced yesterday as a merger of equals, with shareholders of both companies owning approximately 50% of the combined entity. However, Sirius will be giving $4.57 billion of its stock to XM shareholders, a substantial premium to the value of their shares.
Sirius’s Chief Executive Mel Karmazin will lead 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.
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 yesterday, FCC Chairman Kevin Martin said the “hurdle” would be “high” to prove that the deal would be in the public interest.
