New York: Sirius Satellite Radio agreed to buy larger U.S. rival XM Satellite Radio for $4.6 billion in stock on Monday in a deal that gives all subscribers access to entertainers such as Oprah Winfrey and shock-jock Howard Stern.
The transaction, which faces regulatory scrutiny and objections from terrestrial radio companies, gives XM shareholders 4.6 Sirius shares for each XM share held.
The deal has Sirius paying about $4.6 billion(Rs20,200 crore) in stock for XM, or a 21.7% premium to XM’s closing share price of $13.98 on Friday, based on shares outstanding in the latest regulatory filings.
Veteran media executive Mel Karmazin, currently Sirius CEO, will lead the new company as CEO, while Gary Parsons, now chairman of XM, will hold the same position in the new company.
The merger would create a company with about $1.5 billion in 2006 revenue and an enterprise value of $13 billion, including $1.6 billion in net debt.
“This combination is the next logical step in the evolution of audio entertainment,” said Karmazin in a statement. He said it will create “unprecedented choice for consumers.”
The deal will face tough regulatory scrutiny, though. The satellite radio licenses prevent one entity from owning them, however Federal Communications Commission Chairman Kevin Martin said last month that its rules are open to change.
“I think it’s a close call, but more likely than not I think the Justice Department and the FCC approve it,” said Blair Levin, an analyst at Stifel Nicolaus & Co. and a former FCC chief of staff during the Clinton administration.
The National Association of Broadcasters, which represents local broadcast radio stations, immediately criticized the tie-up because it would concentrate the licenses into one company and accused them of seeking a government bailout.