Two Satellite Radio Companies Merge

Elena
20 Feb, 2007
New York City

The combined company is valued at $13 billion, including about $1.6 billion in debt. On condition that the deal is approved by shareholders and regulators, the shareholders of each company will divide the stake equally. FCC Chairman Kevin Martin said that the companies have to prove that the deal would be in the public interest, with consumers having more choice and affordable prices.

[R]8:00 AM Sirius Satellite Radio and XM Satellite Radio Holdings agreed to merge.[/R]
Rivals in the satellite radio industry Sirius Satellite Radio Inc. ((SIRI)) and XM Satellite Radio Holdings Inc. ((XMSR)) announced an agreement to create a $13 billion combined company led by Sirius'' CEO. The $13-billion merger deal, including a debt of about $1.6 billion, is subject to regulatory and shareholders’ approval. Winning shareholder approval is seen as the easy part for the struggling satellite radio companies, whereas winning approval from the Federal Communications Commission and the U.S. Department of Justice''s antitrust division will be the challenging part. FCC Chairman Kevin Martin said that the companies have to prove that the deal would be in the public interest, with consumers having more choice and affordable prices.

On condition that the deal is approved by shareholders and regulators, shareholders of both companies will own 50% of the combined entity. However, Sirius will give $4.57 billion of its stock to XM shareholders, a substantial premium to the value of their shares. Investors in XM will get 4.6 shares of Sirius common stock for each XM share they own. The companies believe that the merger will boost the long-term financial success of satellite radio. Analyst estimates of the present value of cost synergies range from $3 billion to $7 billion.


[R]6:30AM European markets were lower on Tuesday on weak real estate stocks.[/R]
European equity markets declined on Tuesday. By mid morning, Frankfurt Xetra Dax shed 0.1% to 6,978.84, the CAC 40 in Paris lost 0.3% to 5,723.81, while London FTSE 100 was flat at 6,444.3.

Advancers

EMI added 7.3%. EMI announced it received an approach from Warner. EMI said there was no certainty the approach would lead to a takeover offer. Some auto makers gained. Volkswagen, the German carmaker, gained 3.5% as expectations were raised that the company would lift its dividend when it posts its full-year numbers later in the session. Volvo added 1.8% after it agreed to buy Nissan Diesel to add production in Asia, the world fastest- growing economic region. Shareholders in Nissan Diesel, fourth-largest truck maker in Japan will receive 540 yen a share. That is 22% higher than the closing price yesterday. Volvo already owns 19% of Nissan Diesel.

Decliners

Real Estate companies dipped after Land Securities of the UK posted a 2.2% increase in its net asset value per share, but said higher interest rates were beginning to have a cooling effect on the property market. Shares in Land Securities shed 2.3%, while Unibail of France lost 1.7% and Rodamco Europe, listed in Amsterdam, dropped 0.5%. Oil companies retreated after crude prices fell by around 1% overnight. Total of France was down 0.5%, while Norwegian Statoil lost 0.6%.

Crude oil and gold

Oil prices gained on Tuesday after shedding 1% a day earlier as traders were torn between supply anxieties in Nigeria and the nearing end of winter oil demand in top consumer the United States. Crude oil also recovered some of the losses on Monday, trading at $58.67 a barrel on the Globex electronic platform. London Brent crude rose 31 cents to $58.45 a barrel. The New York Mercantile Exchange did not issue a settlement price on Monday as its trading floor was closed for the Presidents Day holiday. Gold for immediate delivery fell $1.90, or 0.3%, to $668.85 an ounce in early trade in London.

Currencies

The euro bought $1.3141 in morning European trading, slightly up from its level of $1.3135 in New York late Monday, hitting six-week highs on worries about nuclear issues and Iran. The British pound rose to $1.9489 from $1.9453. The dollar bought 119.94 yen, compared with 119.56 yen Monday.