$13B U.S. deal aims for satellite radio monopoly
Last Updated: Monday, February 19, 2007 | 4:48 PM ET
CBC News
Betting that regulators will let it go ahead, the two players in satellite radio have signed an all-stock merger valued at $13 billion US.
The combination of Sirius Satellite Radio and XM Satellite Radio would create a monopoly in the business of beaming commercial-free music and other programming from earth orbit to people willing to buy a special radio and pay fees of about $15 Cdn a month.
Satellite radio listeners get scores of commercial-free channels, for a fee.
(Associated Press)
It would bring together about 140 music channels and other offerings, including Oprah Winfrey (now on XM) and CBC Radio (on Sirius).
The idea may face tough scrutiny in Washington, where the U.S. Federal Communications Commission has been unwilling up to now to let the two services become one.
Ending months of rumours, the two companies announced the deal on Monday afternoon, calling it "a merger of equals with a combined enterprise value of approximately $13 billion."
The two have been locked in a money-losing battle for subscribers and their shares had been trading near 52-week lows.
Some analysts have suggested the FCC would take pity on them and lift its ban on a merger, despite the market power it would give the resulting entity.
There was no immediate word on how the merger would affect the two companies' Canadian partners, which operate under a separate regulatory structure.
Sirius Canada Inc. is owned by Sirius Satellite, Toronto-based Standard Radio and the CBC. XM Canada is run by Canadian Satellite Radio Holdings, also of Toronto, in partnership with XM Satellite.
XM Canada issued a statement saying it was "carefully reviewing" the U.S. merger proposal but did not conceal its enthusiasm.
"This is great news for the satellite radio industry in North America and could offer further benefits to consumers, retailers, partners and shareholders," John Bitove, chairman of Canadian Satellite Radio Holdings, said in the statement.
"As Sirius and XM seek U.S. government approval, we will diligently review the possible alternatives available to Canadian Satellite Radio to benefit our customers and shareholders."
Share price jumps 27 per cent in Toronto trading
In Toronto trading, the company saw its share price jump 27 per cent on Monday to $8.44.
The U.S. companies saw their share prices rise in European trading before the announcement, apparently because of a report in Monday's New York Post that a deal was imminent.
On the Frankfurt market on Monday, XM was up 8 per cent to 10.99 euros and Sirius was up 8.6 per cent to 3.03 euros.
In New York on Friday, XM closed at $13.98 US, up 7.7 per cent, and Sirius at $3.70, up 2.8 per cent. U.S. markets were closed on Monday for the Presidents Day holiday.
In a joint statement, the companies said Sirius CEO Mel Karmazin would become CEO of the combined company and XM chairman Gary Parsons would be chairman.
