Washington and New York–XM Satellite Radio and SIRIUS Satellite Radio 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. 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 merged companies will create a nationwide audio entertainment provider with combined 2006 revenues of approximately $1.5 billion based on analysts’ consensus estimates. Today the companies have approximately 14 million combined subscribers. Together, SIRIUS and XM anticipate a stronger platform for future innovation within the audio entertainment industry and looks to provide significant benefits to all constituencies, including: greater programming and content choices; accelerated technology innovation such as chip set and radio design; enhanced financial performance, with Wall Street analysts publishing estimates of the combined companies at $3 billion to $7 billion; a better entertainment competitor in a field that has seen the entrance of iPods, HD radio, and Internet broadcasting.
Mel Karmazin, currently chief executive officer of SIRIUS, will become chief executive officer of the combined company and Gary Parsons, currently chairman of XM, will become chairman of the combined company. The new company’s board of directors will consist of 12 directors, including Karmazin and Parsons, four independent members designated by each company, as well as one representative from each of General Motors and American Honda. Hugh Panero, the chief executive officer of XM, will continue in his current role until the anticipated close of the merger.
“We are excited for the many opportunities that an XM and SIRIUS combination will provide consumers,” said Gary Parsons, Chairman of XM Satellite Radio and Hugh Panero, CEO of XM Satellite Radio, in a joint statement. “The combined company will be better positioned to compete effectively with the continually expanding array of entertainment alternatives that consumers have embraced since the Federal Communications Commission (FCC) first granted our satellite radio licenses a decade ago.”
“This combination is the next logical step in the evolution of audio entertainment,” said Mel Karmazin, CEO of SIRIUS Satellite Radio. “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 transaction is subject to approval by both companies’ shareholders, the satisfaction of customary closing conditions and regulatory review and approvals, including antitrust agencies and the FCC. Pending regulatory approval, the companies expect the transaction to be completed by the end of 2007.