News for 'SIRI' - (=DJ UPDATE:Karmazin Confident XM Deal Synergies
Could
Be $5B-$6B) (Adds more details from conference call throughout.)
By Ellen Sheng
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--By combining, XM Satellite Radio Holdings Inc.
(XMSR) and Sirius Satellite Radio Inc. (SIRI) could save between $5
billion to $6 billion, Mel Karmazin, chief executive of Sirius, said
Tuesday.
"There are synergies in every line item of the income statement,"
Karmazin said on a conference call, noting savings on everything from
catering bills to legal expenses.
Wall Street analysts have in the past estimated between $3 billion to
$7
billion in savings from a merger. Cost savings, which are expected to
equal or exceed the market capitalization of one of the companies, will
help the combined company generate more cash flow and reach
profitability
sooner.
Putting to rest months of speculation, XM and Sirius announced their
intention to combine in a merger of equals on Monday. XM and Sirius
shareholders will each own 50% of the combined company.
The big question mark hanging over the merger is regulatory approval.
Speaking on a conference call Tuesday, executives said they are
confident
that the deal has more than a 50% chance of approval. The deal benefits
not only shareholders but consumers as well, they said. Combined, they
said, the companies will be able to offer broader content choices and
faster technological innovation, all on a smaller combined budget.
A combined company will also benefit from more advertising interest.
Together, the companies have about 14 million subscribers, making the
combined company a more attractive nationwide advertiser, Karmazin
said.
The companies are working closely with regulators. The proposal will
be
put before shareholders in four to six months, executives said.
Regulatory
approval is expected within nine months, and the companies expect the
deal
will close by the end of the year. It comes with a $175 million breakup
fee if one of the boards does not approve the transaction.
Meanwhile, operations at the two companies will remain independent
and
unchanged until the deal closes. Karmazin will stay on as CEO of the
new
company, which does not yet have a name. Gary Parsons, XM's chairman,
will
become chairman of the combined company.
Integrating the operations of the two companies may take quite some
time. Besides deciding on the base of operations - XM is based in
Washington, D.C., while Sirius is in New York - the companies'
satellites
and equipment will need to be integrated slowly without disrupting
current
agreements with car makers and programmers.
William Kidd, an analyst at Wedbush Morgan, expects that it will take
three to five years for many of the revenue synergies to be realized.
Shares of XM rose $1.66, or 12%, to $15.66 in recent trading. Sirius'
stock was up 27 cents, or 7%, to $3.96.
-By Ellen Sheng, Dow Jones Newswires; 201-938-5863;
ellen.sheng@dowjones.com
(END) Dow Jones Newswires February 20, 2007 10:43 ET (15:43 GMT)
Copyright (c) 2007 Dow Jones & Company, Inc.- - 10 43 AM EST
02-20-07Source: DJ Broad Tape |
