XM Satellite Radio and Sirius Satellite Radio are to merge creating a US$13 billion company.
The “merger of equals” needs to be approved by the US Government as it would create an industry monopoly, as well as shareholders.
Sirius, based in New York, and XM, based in Washington are both carrying debt, and the merger would see that combined debt reach $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.
The Chief Executive Officer of Sirius, Mel Karmazin, will become Chief Executive Officer of the combined company and Gary Parsons, currently Chairman of XM, will become Chairman of the combined company.
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.
The combination creates an audio entertainment provider with combined 2006 revenues of approximately $1.5 billion and approximately 14 million combined subscribers.
The companies say the merger will allow for greater choice for consumers, allowing a broader selection of content, including a wide range of commercial-free music channels, sports coverage, news, talk, and entertainment programming.
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.
The companies also expect the merger to accelerate technological innovation through efficiencies in chip set and radio design and procurement, as well as positioning satellite radio better to compete for consumers’ attention and entertainment dollars.
Apart from existing competition from free-to-air AM and FM radio, iPods and mobile phone streaming, satellite radio will face new challenges from the rapid growth of HD Radio, Internet radio and next generation wireless technologies.
Karmazin says the combination is the next logical step in the evolution of audio entertainment: “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 capitalise 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.”