WASHINGTON and NEW YORK — XM Satellite Radio and SIRIUS Satellite Radio are set to merge in a whopping $13 billion deal. The two radio powerhouses announced today that they 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.
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% of the combined company.
Mel Karmazin, currently CEO of SIRIUS, will become CEO 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, Parsons, four independent members designated by each company, as well as one representative from each General Motors and American Honda. Hugh Panero, the CEO of XM, will continue in his current role until the anticipated close of the merger.
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 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. Representatives from both companies are predicting the merger will create a stronger platform for future innovation within the audio entertainment industry and provide significant benefits to all constituencies, including greater programming and content choices; accelerated technological innovation; benefits to OEM and retail partners; enhanced financial performance; and a more competitive audio entertainment provider in general.
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.
The fate of the two companies respective partners in Canada was not mentioned in the announcement. Sirius Canada is a partnership of the Canadian Broadcasting Corporation, Standard Radio and Sirius Satellite Radio, while XM Canada is affiliated with XM Satellite Radio Holdings and Canadian Satellite Radio Holdings. No announcements were immediately made regarding changes in programming.
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