NEW YORK: Sirius Satellite Radio Inc. announced it plans to buy rival XM Satellite Radio Holdings Inc. for $4.6 billion in stock to create a $13 billion entity, but observers said the proposal may hit regulatory roadblocks.
Under an agreement announced by the two companies Monday, XM Satellite Radio Holdings' shareholders will receive 4.6 Sirius shares for each XM share held, which is a 21.7 per cent premium on XM shares at Friday closing prices.
The deal may secure shareholder approval, but the challenge would be to pass through the Federal Communications Commission and the justice department's antitrust division, allaying antitrust fears. Chairman of FCC Kevin Martin has already gone on record saying his agency's rules do not approve such a deal.
The unified entity will bring artistes like Howard Stern, Martha Stewart and Oprah Winfrey, singer Bob Dylan, motivational guru Deepak Chopra and Major League Baseball under one roof. It will have some 14 million subscribers. The new company also proposes to introduce a service where subscribers will be able to pick the shows they prefer and pay a monthly fee in terms of the service availed of.
If the merger goes through, XM Satellite Radio Holdings chairman Gary Parsons will be the chairman of the new company, while its current chief executive, Hugh Panero will stay on until the merger is completed. Sirius chief executive Mel Karmazin, will be the chief executive of the company.
Post-merger, Sirius would own about 53 per cent of the shares of the combined entity and XM Satellite Radio Holdings 47 per cent based on the terms of the deal and shares outstanding in the latest filings.
Both Karmazin and Parsons said the new company will support devices offered by both companies while developing a new product that would work on both satellite radio services. Sirius gets its devices from Sony Corp., Pioneer Corp. and Kenwood Corp., while those for XM come from Samsung Electronics Co. and Audiovox Corp.
XM shares closed at $13.98 Friday, down 42 per cent from their 52-week high of $24.21 last April. Sirius shares were down 34 per cent from their year high of $5.57 last April.
