Lost in space?

1 May 2007 By Robert Cyran Follow @rob_cyran

Both stocks are trading below the preannouncement level. This gives shareholders a free option on huge mergerrelated savings. While both Sirius Satellite and XM Satellite are pushing the deal, the market is pricing in a zero change of regulatory approval.

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During first quarter, Sirius Satellite added 556,490 net subscribers, and XM Satellite Radio added 285,000. Sirius expects to end the year with more than 8M users and XM more than 9m.

Since the two satellite radio companies announced on February 19 that they planned to merge, XM's stock has fallen 17% and Sirius has dropped 21%. The two are merging via a taxfree share swap. Shareholders of each company would own half the new entity. XM shareholders would receive 4.6 shares of Sirius stock for each share they own.

The two companies are specifically forbidden to combine under their licenses from the Federal Communications Commission. In order for the combination to succeed, the FCC must exempt the companies from this provision and the Department of Justice must approve.

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