More than two years of merger rumors came to fruition Monday (Feb. 19) as Sirius Satellite Radio and XM Satellite Radio announced that the two FCC-licensed companies 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. In 2006, the companies had combined revenues of $1.5 billion and both companies tentatively reported having finished the fourth quarter in the black and with a record amount of new subscribers totaling more than 14 million in all.
"This combination is the next logical step in the evolution of audio entertainment," said Mel Karmazin added. "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 combined company will be positioned to capitalize on Sirius and XM’s complementary distribution and licensing agreements to enhance availability of satellite radios, offer expanded content to subscribers, drive increased advertising revenue and reduce expenses. Each of our companies has a strong commitment to providing listeners the broadest range of music, news, sports and entertainment and the best customer service possible. We look forward to sharing the benefits of the exciting new growth opportunities this combination will provide with all of our stakeholders."
The combined company will offer a huge array of programming choices including Howard Stern, Opie & Anthony, and Bob Edwards in the morning, Martha Stewart, all major league sports including NFL, MLB, NASCAR racing, NBA, and college sports, plus scores of commercial-free music programming. The companies added that “together, XM and Sirius will be able to improve on products such as real-time traffic and rear-seat video and introduce new ones such as advanced data services including enhanced traffic, weather and infotainment offerings.”
Passing regulatory muster will be the companies’ biggest feat. The companies each paid about $80 million for FCC licenses in 1996 to operate national only satellite-delivered services. The stipulation at conception was the two satellite operators could not merge operations and that there would be two separate licenses. During a chat with reporters outside his FCC office in Washington in January, FCC Chairman Kevin Martin emphasized that a merger of Sirius and XM could not happen. The following day in New York, he told another set of reporters and analysts that the rules could be changed. Whether Congress is in the mood for a satellite monopoly remains to be seen.
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