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XM, Sirius Agree to $13 Billion Merger

XM Satellite Radio and SIRIUS Satellite Radio 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 CEO of SIRIUS, will become CEO of the combined company. Gary Parsons, currently chairman of XM, will become chairman of the combined company. Hugh Panero, the Chief Executive Officer of XM, will continue in his current role until the anticipated close of the merger.
The companies say that the combined company will be 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 merger of equals will also enhance the long-term financial success of satellite radio by allowing the combined company to better manage its costs, the companies say.

Wall Street equity analysts have published estimates of the present value of cost synergies ranging from $3 billion to $7 billion.

“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 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.

In a research note on Friday about the possibility of a merger between the two rivals, Bear Stearns analyst Robert Peck wrote that a merger would “likely pass” regulatory hurdles.

The National Association of Broadcasters has asked policymakers to reject what they call an “anti-consumer proposal,” writes CNN Money.

Today the companies have approximately 14 million combined subscribers.