Mar 24th, 2008
xm sirius merger - xm sirius merger approved and Stock implications
XM Sirius merger from CNN:
NEW YORK (CNNMoney.com) — The U.S. Justice Department approved the merger between satellite radio companies Sirius and XM Monday, more than a year after the two companies first announced their deal.
But for fans of Howard Stern, Opie & Anthony and other Sirius and XM on-air personalities, there are still many questions about how much a combined Sirius-XM service will cost and what programs they’ll be able to hear. Plus, Sirius and XM face one more regulatory hurdle before the deal can officially be completed.
What does the XM Sirius Merger mean for the consumer?
Its hard to say what the merger means for the consumer because the FCC still hasn’t approved the merger. The current price for XM and Sirius is $12.95 each for base packages. Supposedly they will offer a price plan where consumers can pick their favorite sirius stations as well as their favorite XM stations for a varied price…but less than what the combined service would currently cost.
What does the XM Sirius Merger mean for stock holders?
Shares of both jumped somewhat today with the DOJ announcement. XM (XMSR) went up 15.5% while Sirius (SIRI) went up to 8.6%. If the deal is approved by the FCC chances are good that both XM and Sirius will jump up again. On the flip side, if it is declined by the FCC I suspect there is going to be a nasty drop. The overall picture though is that if the deal goes through, long term both sets of stockholders will profit long term…especially if they give the combined, ala cart programming. I personally have considered satellite radio for a while but I didn’t want a standard package and the channels I wanted were scattered too much over the two different providers. I would imagine there are a fair amount of people in the same boat as I am. The whole SHOULD be greater than the sum of the parts.
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The merger has been unfairly held up for over a year via government interference. My guess is that terrestrial radio stations as a group banded together to pressure officials. Geez…even the Exxon-Mobil merger was less scrutinized than this deal has been!
But I think that the consumers win in the end if the merger goes through. I just wrote an email to the Chairman of the FCC (the last roadblock to the merger) requesting that the FCC allow the merger, and let the free market decide the fate of the two companies (which by the way have been money losers…you can see their balance sheets on http://www.sec.gov/cgi-bin/srch-edgar). The plan is to have the a la carte service, which like you said, should drop prices for consumers.
As far as stocks go, Kramer on Mad Money is suggesting that $5 target price for Sirius in the SHORT term would be likely. But I think that the plan of Sirius CEO Mel Karmazin for a combined company that includes long term growth and expansion would be a good reason to consider them now since they are at $3 and change. Karmazin is a winner.
Randy, I couldn’t agree more. I see it as a win win win for consumers, stock owners and both businesses. The truth is, the competition in this case is from terrestrial radio, as well as podcasts, MP3 players, etc. I see this as the only way for satellite radio to truly thrive.