Sirius to buy XM in $4.6 billion stock deal

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Sirius to buy XM in $4.6 billion stock deal

New York (NY) – Sirius has announced that it has reached an agreement to buy rival XM, merging the two companies that have divided the booming satellite radio business so far. However, Sirius will need regulatory approval from the FCC, which may be a cumbersome hurdle on the way to create a satellite radio giant.

In media statements, XM and Sirius executives said that they are working on creating a completely new name for the combined radio service, as well as finding a new location for its headquarters.  Sirius CEO Mel Karmazin would keep his position as head of the new company.

Before all the structural details are finalized, though, the merger needs to be accepted by the Federal Communications Commission (FCC), which has regulatory power over the radio industry.

FCC chairman Kevin Martin was quoted as saying, “the hurdle here (…) would be high as the commission originally prohibited one company from holding the only two satellite radio licenses.”  Karmazin, however, said that having just one provider would actually open up more choices for consumers. XM chairman Gary Parsons added that he is “confident” that the merger will be approved.

Over the past several years, XM has emerged the market leader, despite Sirius’ much more aggressive marketing efforts. Interestingly, Sirius would be buying XM in this proposed deal, resulting in Sirius shareholders owning the majority of the new company: According to the agreement, Sirius would hold 53%.  XM would take the other 47%.

Neither company would comment on how the deal will affect current subscribers, but they did say that their top celebrity-fronted channels, including Sirius’s Howard Stern and XM’s Oprah Winfrey, would remain in tact and all be available in the same service.

Sirius and XM mentioned that a failed merger could cost the companies about $175 million in related charges.