Satellite radio companies XM Canada and Sirius Canada on Wednesday announced plans to merge.

The move follows longtime speculation about the two combining their operations to save costs and build two audiences into one of about 1.7 million.

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Canadian Satellite Radio Holdings' 3-month chart

The all-stock deal was valued at about $520 million and included $130 million in long-term debt.

"As a combined entity, XM Canada and Sirius Canada will deliver exceptional value to subscribers, and enhance the long-term success of satellite radio in Canada," John Bitove, chairman of Canadian Satellite Radio, said in a statement.

Canadian Satellite Radio Holdings is the parent company of XM Canada. Its shares rose 50 cents, or 15 per cent, to $3.75 on the Toronto Stock Exchange late in the trading session.

In the United States, Sirius and XM merged late last year to form Sirius XM, which holds 47 per cent of Canadian Satellite Radio Holdings.

Sirius Canada, the biggest satellite radio operator in Canada, is 40 per cent owned by CBC Radio, 40 per cent by Slaight Communications and 20 per cent by Sirius XM in the United States.

"The benefits of a merger are clear, and together we'll be better able to create more growth and opportunity for shareholders, accelerate technological innovation and ensure that satellite radio is able to compete in the rapidly evolving audio entertainment industry," said Mark Redmond, CEO of Sirius Canada.

"This combination is the next logical step in the evolution of satellite radio in Canada."

The transaction is subject to regulatory approval by the CRTC.

With files from The Canadian Press