XM Satellite Radio and Sirius Satellite Radio have announced that they have agreed to combine the two rival companies in a tax-free, all-stock “merger of equals” with a combined value of approximately $US13bn, which includes net debt of approximately $1.6bn.
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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% of the combined company. Mel Karmazin, currently chief executive officer of Sirius, will become CEO 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 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 CEO of XM, will continue in his current role until the anticipated close of the merger.
A joint statement said: “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.”
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.
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By GlobalDataThe combination creates a nationwide audio entertainment provider with combined 2006 revenues of approximately $1.5bn based on analysts’ consensus estimates. Today the companies have approximately 14m combined subscribers but neither has so far made a profit as they have spent heavily on setting up, programming costs, sports event broadcast deals and attracting big-name personalities as presenters.
The deal is subject to approval by both companies’ shareholders, government agencies and the Federal Communications Commission (FCC). Pending such approvals, the companies expect the transaction to be completed by the end of 2007.
However, US analysts have been quoted as saying they doubt government (FCC) approval will be given as the merger would create an anti-competitive satellite radio monopoly.
