WSJ Confirms Positive Stifel Assessment on Radio Merger

[Update below] A positive report by Stifel analyst Blair Levin on the happenings at the FCC has sent Sirius (SIRI) and XM (XMSR) upwards. Levin indicates that the FCC staff is now drafting a document which would approve the merger of Sirius and XM. Speculation that the FCC and DOJ are working closely on this process has circulated from time to time, and many feel that a regulatory decision could happen in the very near future.

Last week at a media conference hosted by Bear Stearns, Sirius CEO Mel Karmazin indicated that Sirius and XM have not had much activity with the DOJ for some time, and that they have had a lot of interaction with the FCC. One possible situation is that the decision from the DOJ is already known to the FCC, and that the DOJ is coordinating with the FCC on an announcement.

Should the merger be approved, there will likely be stipulations placed upon the deal, and that any DOJ approval will also be based on the stipulations outlined in part by the FCC. This would align the two regulators on a uniform position prior to a merger decision announcement. Such activity has happened recently.

STIFEL NOTE EXCERPTS:

XM-SIRIUS: The Buzz Gets Louder. There are further signs that the DOJ review of the proposed XM-Sirius merger is getting close to completion — stemming mostly from a flurry of activity at the FCC. We understand the FCC staff is drafting a document that would approve the deal, though we note that such activity is also an uncertain indicator of the DOJ outcome. Nonetheless, the FCC rumblings bolster our sense that the DOJ will likely clear the deal followed by FCC approval with conditions. In addition to other conditions we’ve previously discussed, the FCC could require some kind of leased-access offering, in which XM-Sirius makes available a certain percentage of its capacity for independent programmers. We think the critical FCC question is whether the two Democrats, both of whom have expressed concerns about the merger, could be persuaded to vote for the deal if a leased-access condition were included.

Additional excerpts from the report are available to members on the Sirius Buzz Forums.

[Update]: In an article published Thursday by the Wall Street Journal, an assessment made by Stifel analyst Blair Levin has been confirmed.

Sirius Buzz broke the Stifel news Thursday morning shortly after the market opened. The Stifel note, which stated speculation that FCC staff was in the midst of preparing documents for a potential merger approval, had additional confirmation Thursday in an article by the Wall Street Journal.

The Journal indicates that FCC Chairman Kevin Martin stated in a press conference that he has asked the staff to draft a document incorporating a variety of possible outcomes for the merger proposal.

“I have the staff drafting various options,” Mr. Martin said. “I haven’t figured out what I think we should do on it yet.”

Granted, the stories differ a bit in nature, but the fact that Martin has made a statement such as he did is indication that regulators are getting very close to a merger decision. It is my opinion that the DOJ and FCC are coordinated in their efforts, and that an announcement will be made in which the DOJ will elect to not challenge the merger if certain FCC mandates are met. The FCC mandates are not known, but having a pair of sources deliver similar reports on the same day would indicate that the merger process is getting to a point of decision.

Likely, some of the speculation that saw both Sirius and XM rise in price Thursday will now spill over into the next trading session. If additional sources begin to add further confirmation, investors may want to keep a close eye on these equities. After hours, Sirius and XM spiked up with bigger gains than they had seen during the regular trading session.

Tyler Savery Position - Long Sirius, Long XM

Comments

[sparky:]

When the merger goes through, I think we all owe Tyler Savery a beer. Great coverage.

2008 Mar 21 08:56 AM

[163888:]

Even if it doesn't, we do. I have enjoyed reading his articles. My personal favorite was when Tyler took Jonathan Jacoby to the wood shed, and exposed his ridiculous comments and misprints. Jacoby should have been fired a long time ago. Anybody who has such low morals to give a price target way higher then the current price and keeps doing it as it tanks and his own company is selling it, should be shot. Vary vary nice job on that one, Tyler.

2008 Mar 21 11:16 AM

[User 166694:]

ditto to both of the above. Savery knows his stuff.

2008 Mar 21 04:00 PM

[User 163772:]

You are a good man, Tyler!

2008 Mar 24 08:12 AM

[ace22:]

I agree keep up the good work tyler.
p.s. i think you should write an article about all the congressman who oppose the merger that have recieved money from terestrial radio. That would be interesting.

2008 Mar 24 10:06 AM

[bosch1974:]

I agree with the above, Tyler has done great covering this. His writing has become better (and more even-handed I suppose) as this saga has unfolded. But what will he do with all of his free time when this finally ends? :)

2008 Mar 24 10:52 AM

[stinkaroo:]

Bob-a-boey! Bob-a-Boey! Bob-a-boey!

2008 Mar 24 01:18 PM