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Satellite radio companies Sirius and XM have signed a merger agreement. The tax-free, all-stock deal values the combined company at $13 billion, including $1.6 billion in debt. Holders of XM shares would get 4.6 Sirius shares for each XM share they own. The deal would value XM shares at $17.02, 22% above their Friday close. The companies have lost $7 billion over the past eight years as they have battled for subscribers and high-profile talent, and their share prices have fallen 47% over the past year. Together, they can offer subscribers greater variety, including sports, news, and hosts like Oprah Winfrey and Howard Stern. The deal will require the creation of a new consumer radio that can receive both signals, and will require the FCC to waive a rule that forbids the merger. The DoJ, too, will need to decide whether the combination would violate antitrust regulations. Sirius and XM claim their marriage would not create a monopoly, since they compete with media offerings like iPods, cellphones, and HD Radio. In addition to regulatory issues, there is concern how Sirius investors will respond to the issuance of over a billion shares of rival XM, and doubts whether a combined company will be any better equipped to stem the slowdown in satellite subscriber growth.

Sources: Bloomberg, USA Today, CNN.com, MarketWatch (I, II), Wall Street Journal, TheStreet.com, Press release
Commentary: Bear Stearns Rekindles XM/Sirius Merger ChatterSirius and XM Soar on Merger Speculation, Tank on FCC Chairman's CommentsXM Softens Stance on a Merger with Sirius, But DoJ and FCC Stand in the Way
Stocks to watch: Sirius Satellite Radio Inc. (SIRI), XM Satellite Radio Holdings Inc. (XMSR). Competitors: Clear Channel Communications Inc. (CCU), Cumulus Media Inc. (CMLS)

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Source: Sirius and XM Satellite to Merge - If They Can Clear Regulatory Hurdles