Satellite radio's XM, Sirius to merge

[EV_Ares]

NEW YORK - Satellite radio rivals XM and Sirius say they have reached an agreement to merge.

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Speculation about a potential merger between the two companies has persisted for months, and analysts and company executives say such a deal could have significant cost savings. However, many remain skeptical that a deal would be able to pass regulatory scrutiny.

A clause in the Federal Communications Commission ruling granting licenses to the satellite radio operators says that one company cannot own the other one, but the FCC would have the power to change the rule if it chose to. Any deal would also have to pass an antitrust review at the Department of Justice.

The New York Post reported that XM's chairman Gary Parsons would likely keep that title in the combined company, while Sirius' CEO Mel Karmazin would become CEO. It wasn't clear if XM's CEO Hugh Panero would remain.

The shares of both Sirius and XM tumbled more than 40 percent last year on concerns about whether the rapid growth both companies had seen would continue. Both stocks have gained support in recent months from speculation that they would attempt to merge.

XM's stock rose again on Friday after an analyst said in a research note that a merger would have a good chance of passing regulatory hurdles.

http://news.yahoo.com/s/ap/20070219/ap_on_bi_ge/xm_radio_sirius;_ylt=Avy8U1bPryvZboH23PZo8ejMWM0F

[clbuck]

1. Here's a press release:

http://xmradio.mediaroom.com/index.php?s=press_releases&item=1423

[hlthe2b]

2. Here is the press release from XM

It does not seem to clarify much for the consumer, though


SIRIUS and XM to Combine in $13 Billion Merger of Equals

Provides Consumers with Enhanced Content, Greater Choices and Accelerated Technological Innovation

Enables Satellite Radio to Better Compete in Rapidly Evolving Audio Entertainment Industry

Extraordinary Value Creation for Shareholders

Mel Karmazin to Serve as Chief Executive Officer and Gary Parsons to Serve as Chairman of Combined Company

WASHINGTON and NEW YORK, Feb. 19 /PRNewswire-FirstCall/ -- 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.

Under the terms of the agreement, 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 and 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 Messrs. 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 combined company will benefit from a highly experienced management team from both companies with extensive industry knowledge in radio, media, consumer electronics, OEM engineering and technology. Further management appointments will be announced prior to closing. The companies will continue to operate independently until the transaction is completed and will work together to determine the combined company's corporate name and headquarters location prior to closing.

The combination creates a nationwide audio entertainment provider with combined 2006 revenues of approximately $1.5 billion based on analysts' consensus estimates. Today the companies have approximately 14 million combined subscribers. Together, SIRIUS and XM will create a stronger platform for future innovation within the audio entertainment industry and will provide significant benefits to all constituencies, including:

* Greater Programming and Content Choices -- The combined company is
committed to consumer choice, including offering consumers the ability
to pick and choose the channels and content they want on a more a la
carte basis. The combined company will also provide consumers with a
broader selection of content, including a wide range of commercial-free
music channels, exclusive and non-exclusive sports coverage, news,
talk, and entertainment programming. Together, XM and SIRIUS will be
able to improve on products such as real-time traffic and rear-seat
video and introduce new ones such as advanced data services including
enhanced traffic, weather and infotainment offerings.

* Accelerated Technological Innovation -- The merger will enable the
combined company to develop and introduce a wider range of lower cost,
easy-to-use, and multi-functional devices through efficiencies in chip
set and radio design and procurement. Such innovation is essential to
remaining competitive in the consumer electronics-driven world of audio
entertainment.

* Benefits to OEM and Retail Partners -- The combined company will offer
automakers and retailers the opportunity to provide a broader content
offering to their customers. Consumer electronics retailers, including
Best Buy, Circuit City, RadioShack, Wal-Mart and others, will benefit
from enhanced product offerings that should allow satellite radio to
compete more effectively.

* Enhanced Financial Performance -- This transaction 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. Wall Street equity
analysts have published estimates of the present value of cost synergies
ranging from $3 billion to $7 billion.

* More Competitive Audio Entertainment Provider -- The combination of an
enhanced programming lineup with improved technology, distribution and
financials will better position satellite radio to compete for
consumers' attention and entertainment dollars against a host of
products and services in the highly competitive and rapidly evolving
audio entertainment marketplace. 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.

"We are excited for the many opportunities that an XM and SIRIUS combination will provide consumers," said Gary Parsons, Chairman of XM Satellite Radio and Hugh Panero, CEO of XM Satellite Radio, in a joint statement. "The combined company will be better positioned to compete effectively with the continually expanding array of entertainment alternatives that consumers have embraced since the Federal Communications Commission (FCC) first granted our satellite radio licenses a decade ago."

"This combination is the next logical step in the evolution of audio entertainment," said Mel Karmazin, CEO of SIRIUS Satellite Radio. "Together, our best-in-class management team and programming content will create unprecedented choice for consumers, while creating long-term value for shareholders of both companies. The combined company will be positioned to capitalize on SIRIUS and XM's complementary distribution and licensing agreements to enhance availability of satellite radios, offer expanded content to subscribers, drive increased advertising revenue and reduce expenses. Each of our companies has a strong commitment to providing listeners the broadest range of music, news, sports and entertainment and the best customer service possible. We look forward to sharing the benefits of the exciting new growth opportunities this combination will provide with all of our stakeholders."

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. Pending regulatory approval, the companies expect the transaction to be completed by the end of 2007.

SIRIUS's financial advisor on the transaction is Morgan Stanley and Simpson Thacher & Bartlett LLP and Wiley Rein LLP are acting as legal counsel. XM's financial advisor on the transaction is J.P. Morgan Securities Inc. and Skadden Arps, Slate, Meagher & Flom LLP; Jones Day; and Latham & Watkins LLP are acting as legal counsel.

Conference Call and Webcast Information

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. The webcast will be archived at http://www.sirius.com/ and http://www.xmradio.com/.

About SIRIUS

SIRIUS, "The Best Radio on Radio," delivers more than 130 channels of the best programming in all of radio. SIRIUS is the original and only home of 100% commercial free music channels in satellite radio, offering 69 music channels. SIRIUS also delivers 65 channels of sports, news, talk, entertainment, traffic, weather and data. SIRIUS is the Official Satellite Radio Partner of the NFL, NASCAR, NBA and NHL, and broadcasts live play-by-play games of the NFL, NBA and NHL, as well as live NASCAR races. All SIRIUS programming is available for a monthly subscription fee of only $12.95.

SIRIUS Internet Radio (SIR) is a CD-quality, Internet-only version of the SIRIUS radio service, without the use of a radio, for the monthly subscription fee of $12.95. SIR delivers more than 75 channels of talk, entertainment, sports, and 100% commercial free music.

SIRIUS products for the car, truck, home, RV and boat are available in more than 25,000 retail locations, including Best Buy, Circuit City, Crutchfield, Costco, Target, Wal-Mart, Sam's Club, RadioShack and at http://shop.sirius.com/.

SIRIUS radios are offered in vehicles from Audi, Bentley, BMW, Chrysler, Dodge, Ford, Infiniti, Jaguar, Jeep®, Land Rover, Lexus, Lincoln, Mercury, Maybach, Mazda, Mercedes-Benz, MINI, Mitsubishi, Nissan, Rolls Royce, Scion, Toyota, Volkswagen, and Volvo. Hertz also offers SIRIUS in its rental cars at major locations around the country.

Click on http://www.sirius.com/ to listen to SIRIUS live, or to purchase a SIRIUS radio and subscription.

About XM

XM (NASDAQ: XMSR) is America's number one satellite radio company with more than 7.6 million subscribers. Broadcasting live daily from studios in Washington, DC, New York City, Chicago, the Country Music Hall of Fame in Nashville, Toronto and Montreal, XM's 2007 lineup includes more than 170 digital channels of choice from coast to coast: commercial-free music, premier sports, news, talk radio, comedy, children's and entertainment programming; and the most advanced traffic and weather information.

XM, the leader in satellite-delivered entertainment and data services for the automobile market through partnerships with General Motors, Honda, Hyundai, Nissan, Porsche, Subaru, Suzuki and Toyota is available in 140 different vehicle models for 2007. XM's industry-leading products are available at consumer electronics retailers nationwide. For more information about XM hardware, programming and partnerships, please visit http://www.xmradio.com/.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the benefits of the business combination transaction involving Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc., including potential synergies and cost savings and the timing thereof, future financial and operating results, the combined company's plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "will," "should," "may," or words of similar meaning. Such forward- looking statements are based upon the current beliefs and expectations of SIRIUS' and XM's management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond the control of SIRIUS and XM. Actual results may differ materially from the results anticipated in these forward-looking statements.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statement: general business and economic conditions; the performance of financial markets and interest rates; the ability to obtain governmental approvals of the transaction on a timely basis; the failure of SIRIUS and XM shareholders to approve the transaction; the failure to realize synergies and cost-savings from the transaction or delay in realization thereof; the businesses of SIRIUS and XM may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; and operating costs and business disruption following the merger, including adverse effects on employee retention and on our business relationships with third parties, including manufacturers of radios, retailers, automakers and programming providers. Additional factors that could cause SIRIUS' and XM's results to differ materially from those described in the forward-looking statements can be found in SIRIUS' and XM's Annual Reports on Form 10-K for the year ended December 31, 2005, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006, June 30, 2006 and September 30, 2006 which are filed with the Securities and Exchange Commission (the "SEC") and available at the SEC's Internet site (http://www.sec.gov/). The information set forth herein speaks only as of the date hereof, and Sirius and XM disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this press release.

Important Additional Information Will be Filed with the SEC

This communication is being made in respect of the proposed business combination involving SIRIUS and XM. In connection with the proposed transaction, SIRIUS plans to file with the SEC a Registration Statement on Form S-4 containing a Joint Proxy Statement/Prospectus and each of SIRIUS and XM plan to file with the SEC other documents regarding the proposed transaction. The definitive Joint Proxy Statement/Prospectus will be mailed to stockholders of SIRIUS and XM. INVESTORS AND SECURITY HOLDERS OF SIRIUS AND XM ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors and security holders will be able to obtain free copies of the Registration Statement and the Joint Proxy Statement/Prospectus (when available) and other documents filed with the SEC by SIRIUS and XM through the web site maintained by the SEC at http://www.sec.gov/. Free copies of the Registration Statement and the Joint Proxy Statement/Prospectus (when available) and other documents filed with the SEC can also be obtained by directing a request to Sirius Satellite Radio Inc., 1221 Avenue of the Americas, New York, NY 10020, Attention: Investor Relations or by directing a request to XM Satellite Radio Holdings Inc., 1500 Eckington Place, NE Washington, DC 20002, Attention: Investor Relations.

SIRIUS, XM and their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding SIRIUS' directors and executive officers is available in its Annual Report on Form 10-K for the year ended December 31, 2005, which was filed with the SEC on March 13, 2006, and its proxy statement for its 2006 annual meeting of stockholders, which was filed with the SEC on April 21, 2006, and information regarding XM's directors and executive officers is available in XM's Annual Report on Form 10-K, for the year ended December 31, 2005, which was filed with the SEC on March 3, 2006 and its proxy statement for its 2006 annual meeting of shareholders, which was filed with the SEC on April 25, 2006. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the Joint Proxy Statement/Prospectus and other relevant materials to be filed with the SEC when they become available.

Contacts

SIRIUS
Media Relations
Patrick Reilly
212-901-6646
[e-mail]

Investor Relations
Paul Blalock
212-584-5174
[e-mail]

Hooper Stevens
212-901-6718
[e-mail]

XM
Media Relations
Nathaniel Brown
212-708-6170
[e-mail]

Chance Patterson
202-380-4318
[e-mail]

Investor Relations
Joseph Wilkinson
202-380-4008
[e-mail]

Richard Sloane
202-380-1439
[e-mail]

SOURCE: SIRIUS Satellite Radio; XM Satellite Radio

CONTACT: Patrick Reilly, Media Relations, [phone],
[e-mail], or Paul Blalock, Investor Relations,
[phone], [e-mail], or Hooper Stevens, Investors
Relations, [phone], [e-mail], all of SIRIUS, or
Nathaniel Brown, Media Relations, [phone],
[e-mail], or Chance Patterson, Media Relations,
[phone], [e-mail], or Joseph Wilkinson, Investor
Relations, [phone], [e-mail], or Richard Sloane,
Investor Relations, [phone], [e-mail], all of XM

Web site: http://www.xmradio.com/
http://www.sirius.com/
http://shop.sirius.com/

[librechik]

3. they have at least 4 RW channels on XM alone--can we get 2 liberal channels?

please?

[hlthe2b]

4. One would hope... Perhaps we can also get MSNBC back?

including KO :loveya:

[M Daniels]

15. Sign the petition

http://www.petitiononline.com/AARonXM/

[newyawker99]

23. Hi M Daniels!!

Welcome to DU!! :toast:

[Dorian Gray]

31. I get Air American on my XM

It's programmed into my car as my #1 station. There are more right wing choices, though. I hope the merger will remedy that. But, I'm psyched about this merger. :)

[Toots]

8. Interesting read..It sounds as if Sirius is buying out XM and calling it a merger

XM stock will be eliminated and all holders of existing XM stock will receive 4.6 shares of SIRI in place of it. Interesting that the lower valued stock SIRI @ under $4.00 per share is becoming the dominant stock...Surprised SIRI stocks have not soared...Sirius actually started turning a profit for the first time while XM has not been profitable for some time...:shrug: Investors should see an opportunity here

[Liberal In Texas]

5. Because monopolies are sooooo good for the consumer. n/t

[MonkeyFunk]

7. unfortunately

the market isn't big enough for two giants, especially considering the capital investment required.

It's a shame, but it's reality.

[Liberal In Texas]

9. It's not an excuse to allow a monopoly.

If they have expanded quicker than market growth, then they need to face the conquences like any other company.

Good grief, they're not the only business that has high overhead/start-up costs.

I am totally against this merger. If allowed, the quality of service will suffer greatly. Innovation will stop in it's tracks.

[MonkeyFunk]

10. well then the alternative

is for one or both companies to go out of business altogether, leaving consumers with either one or zero companies.

Few businesses have startup costs that involve launching satellites.

[Liberal In Texas]

13. Then let them go out of business.

The satellites aren't going to fall out of orbit. Somebody else will buy it up at the bankruptcy sale and start another service.

Just because companies can't figure out a business plan that is profitable, is no reason to allow monopolies to form.

[MonkeyFunk]

14. so no companies

is better than one?

They're not being given a legal monopoly - they're forming a practical one.

As far as I know, others are still free to start their own satellite radio service. It's just the economic realities of the business make it nearly impossible.

[Liberal In Texas]

16. I've never heard of a "practical monopoly".

Mark my words, if they're allowed to merge, there will be less service and higher fees.

As to the notion that anybody can just start up Joe's Satellite Radio Service, bandwith in the US is regulated by the FCC; there are not unlimited frequencies available.

The media always carps about how much it costs for new technology. This is why HDTV has been around since the early '80s but only now is it finally getting to the consumer.

I'm going to stand by my assertion that companies should not be given special consideration just because they haven't figured out how to make a profit, or in many cases, obscene profits. The airwaves are the public commons; they belong to us, not the guys who have been granted government licenses to use it.

[MonkeyFunk]

17. by 'practical'

I simply meant de facto. The government is NOT granting them a legal monopoly, prohibiting others from competing with them, as far as I know.

I don't disagree that a merger will likely cause less service and higher fees. I'm just saying allowing one or both companies to go under doesn't lessen the likelihood of that happening anyway.

[theboss]

19. Bandwith? This is satellite radio

It has nothing to do with bandwith or the FCC. Is there a limited number of cable tv stations?

So...I've come to the conclusion that you don't know what you are talking about.

[hlthe2b]

24. Nothing to do with FCC? Except that FCC DOES

regulate and will have to approve this merger...:shrug:

[theboss]

25. Yes...but not because of bandwith

Though, to be honest, this should be an issue with the FTC, not the FCC. I'm not sure how they got this authority.

[Liberal In Texas]

27. How do you think the magic satellite signals get to your satellite radio? Cable?

They come through the air, using the RF spectrum (RF means radio frequency, fyi)...bandwidth.

[MonkeyFunk]

28. the FCC manages

the auction and sale of those frequencies. It has no regulatory role over the CONTENT spread via those frequencies, unlike with broadcast television and radio.

[Liberal In Texas]

29. Correct. They do not regulate the content ... yet.

Let's hope they never think they should.

[Liberal In Texas]

26. Satellite radio and satellite transmissions are regulated by the FCC.

They have assigned frequencies.

Anything using the RF spectrum in the US is regulated and licensed by the FCC.

Do you think they're just allowed to broadcast willy-nilly?

Cable TV is also regulated by the FCC, but does not have licenses or assigned frequencies. (BTW, in case you didn't know, bandwidth has to do with the RF spectrum, not just internet speeds.)

I don't think YOU know what you're talking about.

[hlthe2b]

11. My worry too

I see no immediate benefit to the consumer... Higher subscription fees sure to come..

[theboss]

21. Well...the benefit is that satellite radio may survive

Both services were losing money hand over fist. This allows them to consolidate their debt, up their subscription base, and alleviate the marketing costs.

[theboss]

20. Considering this product did not even exist 5 years ago....

I'm not sure how much lamenting there should be of its "monopoly" status. The first company to do something is always going to be a monopoly.

[Raskolnik]

33. Help me understand your position:

Are you arguing that it is somehow better for consumers if either XM or Sirius fails, rather than be allowed to merge?

How does that scenario result in better service and/or lower prices for consumers?

[k_jerome]

6. o&a and stern on the same team? no way....nt.

[hlthe2b]

12. We have some industry insiders on DU: wish they'd weigh in

scoop/analysis, please?

[slj0101]

18. As long as Howard 100, Left of Center and Underground Garage

remain untouched, so be it.

This has been in the ethers for a long time, according to things I've heard on the Stern show.

[mvd]

22. I wonder what this means for liberal talk

I don't see anything good coming from one company choosing which personalities to feature.

[itsmesgd]

30. When will we, the lowly subscribers get a letter telling us what is going on?

It would be nice if we, XM'er's, could get all of the Sirius shows in addition to what we have now. I really like Thom and Malloy. They can keep their Howard Stern.

[hlthe2b]

32. yes... I'd like to know what this means for the subscriber..

there was mention made that subscribers might "pick a la carte" to receive content... While this could be good, it flags to me the fact we will undoubtedly all be paying more (and probably for less)