Sirius / SM Merger Finally Approved - And It Only Took 493 Days! 80 comments
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The long-awaited conclusion of regulatory purgatory that began on February 19, 2007 for Sirius (SIRI), XM (XMSR) and their shareholders is over. The merger was officially approved when the consent decree was signed overnight. As advertised, the commission vote fell along party lines with a 3 - 2 split decision.
The definitive agreement indicates that the companies will be combined in a tax-free, all-stock merger of equals. Terms of the deal call for XM shareholders to receive 4.6 shares of Sirius common stock for each XM share held. The transaction is structured as a merger of equals, with Sirius and XM shareholders each owning 50 percent of the combined company.
In a victory for consumers, the content of Sirius and XM will be joined and in most cases will cost less with a la carte packaging, a revolutionary idea that allows Sirius and XM listeners to pick and choose the package that best suits their needs. The voluntary concessions include:
- Turning 24 channels over to non-commercial and minority programming.
- Three year price freeze
- Open Access
- A-La-Carte pricing available within 3 months of deal closure
Concessions agreed to as part of the enforcement issues included requirements that the companies:
- adopt comprehensive compliance plans, and take steps to address any potentially non-compliant radios remaining in the hands of consumers;
- in the case of XM, within 60 days of the order adopting the Consent Decree, shut down 50 variant terrestrial repeaters, and shut down or bring into compliance an additional 50 variant terrestrial repeaters;
- in the case of Sirius, bring into compliance or shut down up to 11 variant terrestrial repeaters within 60 days of the order adopting the Consent Decree. These terrestrial repeaters were shut off by Sirius in October 2006 ; and
- make a voluntary contributions to the United States Treasury of approximately $17 million in the case of XM, and approximately $2 million in the case of Sirius.
The FCC will open a new case to look more closely at HD inclusion. Additional concessions were not released at this time.
Sirius closed Friday at $2.25 per share (-7.02%) on July 25, and XMSR closed at $9.28 per share (-4.35%). After hours, SIRI was slightly up, to $2.29; XMSR dropped another three cents, to $9.25.
Disclosure: Long Sirius, XM.
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This article has 80 comments:
Tyler, thank you for your professional coverage of this stock.
dylan how could the stock go anywhere when the market was closed and it was announced after hours?
These guys know what they're doing.
When and where do you think Mel's (et al) "unfettered" info will be discussed? lol. Fox Business is paid programming after 10am, their websites are littered with archaic news info, etc. Do we have to wait until the "countdown to the opening bell" on Monday?
to all of the nay sayers f you
i just heard a song on sirius by the greatful dead that is timely. the verse goes
"what a strange long journey its been"
run blue dog run
PS This stock is like to drive me nuts, I can't figure to save my life what will happen come Monday morn.
They must close this deal today!
I did not stick it out this long to sell. After, I make my targeted return than I will most likely sell, but possibly not. I will have to view it than just like any other stock.
It's been a while since I was able to reply to a "Blog" and not use words such as "f*cking". It's nice again.
Pop or Drop on Monday?
Not that I think what happens to the stock is all that important in the next two weeks, but I know a lot of folks do. The stock can only move up. Why would you dump shares now? That happened last week. A little patience even in the short run will get us to 2.90- 3.10, an old technical channel (4 -6 months ago). Then the company will let out the PR dogs, retaliate against legal issues (because now they can), give meaningful future guidance, introduce new products and details on what you'll be able to do with existing equipment, and report good third quarter "retail" results because of all the pent up demand. The fourth quarter will be all about Inter-Operable Radios and "Where can I get One?". I would not be surprised to see 4.65 - 5.25 by the end of the year. For those wanting to get out you'll probably get 3.72 -3.90 (roughly 2 x the 1
1.86 - 1.95 low recently set) in mid November. Just my opinion, patience here will be nicely rewarded. For those who have been in for a long time you don't need anyone to tell you that now is not the time to be Weak-In-The Knees.
Pop or Drop? Where do you think this stock will be on December 31, 2008, 2009 ??
It seems we should be at 2.60 Monday at a minimum. If the transaction is consummated this weekend, I think the price is even higher, over $3.00 is my best guess.
I'm hearing much optimism in the posted messages, however I'm quite the pessimist. I won't believe it 'til I see it! Both XM's and Sirius's stocks were down and now this merger is suppose to raise the roof? Why?
I'd like to know: Who's heading the merger? Who're losing their jobs? Is the merger going to stay a monopoly, or is a bigger company going to buy it out?
Just a few things I'm wondering about...
Got to agree with the posters who lean toward the small pop. The movement of this stock has confounded me, but also taught me much about patience.
Holy crap, people have no idea, just how big that spectrum is. Terrestrial radio will never be the same. Thats why they fought to keep this from coming, thats why it took so long for the FCC. They knew full well, just how big this is going to be, they did not want to be the ones that turned terrestrial into what it will end up being. That spectrum is bigger then all the other stations combined think about it this way it took CCU 20 years to get were they are today which is about 750 stations. That only covers not even a tenth of the area that satellite radio covers. Does that tell you how big this really is. God help terresrial if they ever get slapped into paying royalties. My god we have just seen the begining here. Canada has just started to pick up.This thing is going to be almost as big as DISH and DTV.
Guys, the short term is not important, I know you think you have waited a long time already. But I am telling you this is going to be so big I think that a mere 15,000 to 20,000 shares if held onto for the next 3 to 4 years will be enough for many to retire.
First lets go over the concessions.
1.)Turning 24 channels over to non-commercial and minority programming.
I know many think this to be the worst of them. I actually think it is one of the best. The reason is simple, from what I have read and understand SIRI and XMSR both already have most of the channels that comply with this. So one of two things happen both are not so bad. One is SIRI/XMSR do not have to give a full 24 channels up anyway. The second one, is the better of the two though. Because they already have many of these channels they can stop carrying them and let the Public Knowledge and minorities pick up the cost for the content. The best part is that as I understand, The enities dont pay anything for the lease but have to pay for their own content, and people still have to subscribe to get them. So in the end while the quality will go down on those channels, because of the need for more commercials to pay for the content will go up. It will actually save SIRI/XMSR money that they would have had to pay for at least 12 out of the 24 channels (that is being conservative).
2.)Three year price freeze
This is not so bad ether. Lets face it, if Mel could afford to keep the prices down he would he knows there is only so much the masses are willing to pay for radio. That is why I believe this is not even really a concession. They would do this anyway if they could.
3.)Open Access
Who here, would really think this is even a big deal at all anyway. I dont know if most know this, but manufactures are not breaking down SIRI/XMSR doors to build satellite radios. Even if they were, I am sure Mel is going to make dam sure, it is at the very least not harmful to satellite radio. As proof look at the concessions he was able to get.
4.) A-La-Carte pricing available within 3 months of deal closure.
I posted on this before this is what I said about that:
Here is a thought, How many subscribers do you think hold both SIRI and XMSR right now, and are paying the 25.9 each month for both. I have to say, I think the percentage is very very low. Now how many subscribers do you think that have had all the content that they have been exposed to from ether SIRI or XMSR would go down to the 6.99 subscribtion that really only offers music channels. I think that percentage is very very low, as a matter of fact if they would go for that package then chances are there is a big percentage of those that would have (churned out) left anyway. Now how many people that pay 12.95 a month to get one would not mind paying 2 or 4 dollars more to get the SIRI/XMSR you have now plus the best 13 channels from the other. IMO, The al la cart will not only lower churn, but may actually bring up the ARPU. Give them a year and then you will have another price point that will offer, access to both full services, for some higher price.
Here is an example I think we all can agree with: How much did you start paying for your cable/satellite tv when you first got it. Now how much are you paying. I would be willing to bet most have upgraded to the extra package and are now paying more then they did when they first started it.
All I am saying is when you here analyst say the al la cart is going to bring ARPU way down think about what happen to your cable/satellite tv bill. Just a piece of common sense. I also believe Mel Karmazin has thought about it to.
5.) have to have a interoperable radio in 9 months.
Ho no, you mean that they are going to have to put out a radio, that when it comes out, (the sooner the better) will start the big savings and profits for the companies.
6.) Have to provide service to Puerto Rico.
I think that one speaks for its self, if you ask me. Sure there are cost to the towers but in a population of over 3 million plus it being a tourist spot. I think they will be able to find enough people and hotels that are able to afford a satellite radio subscription, to more then pay for the towers.
So there you have it, there they are, all the big bad concessions. Maybe someone can tell me, where are they all that bad, because I just dont see the big down side.
These concessions are one reason, I would get so pissed at people that put Mel Karmazin down. That he was not worth the pay cut he took to come to SIRI.
Next I was rushed the last time I started to write about just how big this is going to be. Now I am just tired. So I will make another quick reason, why I think this is going to be big. Mel did not take a pay cut and come to a smaller company to just sit back and bide his time til retirement (he is not like me LOL). He could have done that anywhere and made more money to boot. I beilieve he came to SIRI with this merger already planned. He is by far no fool, and he could see the slow death of terrestrial radio coming. I believe he came to SIRI to become a even bigger legend then he already was. He in one fail swoop has control of more spectrum then all the terrestrial radio stations combined. He will be running a media giant almost over night. When you consider how long it took all the other terrestrial radio companies to become as big as they are today. He knows that if internet radio does ever become a real business that SIRI/XMSR will be the best posittioned to take advantage of it. The biggest reason is simple internet has to do something that terrestrial doesn't pay royalties. You think terrestrial has alot of commercials just imagine how many they would have, if they had to pay for royalties on top of everything else. the same problem will be there for the internet radio companies. They will have to start to go to a subscribtion base business model. Well SIRI/XMSR are going to have a hugh jump on them. Think of how much it cost SIRI/XMSR to start up in the beginning. I will just say it is not going to be easy when SIRI/XMSR are the 300 lb gorilla, which already has alot of the people that are willing to pay for radio. The well is going to be shallow by the time internet can even become a viable player. Just some common sense with some speculation tossed in.
People could have SatRad, Internet radio, their iPod library, Pandora, etc. in their pockets and their cars. They can listen to whatever they're in the mood for at any given time. If they wanna listen to preimum SatRad content, they'll need a subscription. That doesn't mean everyone's going to sign up immediately, but the sheer volume increase in accessibility is a numbers game that favors a boost in subscriptions.
Piggy-backing off the success of Apple's innovation is a win/win, if SatRad and Apple can form some sort of partnership to link iTunes with SatRad artists and come up with creative business incentives to cooperate. I'm sure there's plenty of money to be made on both sides. As has been stated by many intelligent posters previously: SatRad is about content, not technology - CONTENT IS KING, and consumers are willing to pay for it...
Just my speculation for the not so distant future (3-5 years)... As much as I want to unload my block and get out, I think I might hold for a long, long, long time... ;o)
10 years from now, it's gonna be like one of those Motley Fool ads proclaiming "if you had invested in SIRI in July of 2008, you'd be up a gazillion % and your initial investment of $10K would be worth $250M!!!"
Good luck everyone - let the games begin!
Why no comment about this Friday downgrade?
So I don't know where Mel will take SIRI in the future, but I'm willing to bet that he has a hopper full of plans we haven't even thought of yet. What SIRI is today is nothing like what it will be in a few years.
My feeling is that the markets that they are already involved in while competing with each other, kept them subserviant to their partners in all negotiations. People need to understand, now as before, content is "King" and Sirius owns the content and the ability to deliver it everywhere. Mel has been brilliant in this strategy, which is why they were taking market share from XM prior to the merger announcement. Without having to compete with anyone other than Terestrial Radio, Ipods, Internet Radio, or whatever...., their content and delivery system make them so much more valuable than when they were slugging it out with XM. It doesn't matter that the Auto market is undergoing a transition from gas guzzlers to green machines, they are all going to want the content that is now only available from the inter-operable Sirius compatable equipment. There is not going to be enough equipment out their to keep up with the demand, a real problem in bringing in all the cash at first. I cannot believe that analyst toting the demise of the stock will not get on board and see this new potential. The Market and analysts have short memories and are always on board with significant industry turning points, and this is a very significant turning point for Satellite Radio. That is why we have seen and will continue to see over the next couple of weeks NAB try to undermine this deal.
I think everyone can agree that only and "Idiot" cannot see the potential, now that the Political BS is over, for the New Company. So OKMONEY after doing your "Due Dilligence" and deciding that "Joe Sixpack" isn't a subscriber, I think you should reconsider your methods of doing "DD". Your current method will have you invest in something else and watch on the sidelines as this all the success of this technology comes to pass. Maybe you'll feel safe to invest in this company when it has a positive cash flow and earnings of .13 / share. That's OK but the stock will be selling at 12-15 / share by then. The money to buy this subscription service at 6.25 a month will come from "Joe Sixpack" giving up a "sixpack" of beer for great content.
What a smack in the face it would be to Clear Channel, the NAB, and all the other special interests who spent millions of dollars delaying this merger, if Sirius were to realize it's full potential and become the entertainment powerhouse it rightfully deserves to be!
Imagine terrestrial radio becoming nothing more than an ultra-localized medium, struggling to make ends meet, relying solely upon local advertising revenue from car dealers, bars and restaurants!
Priceless!!
Remember, Sirius reports earnings and will be able to give guidance for the combined company on Monday. That is a big deal too. If profit and free cash flow is predicted in '09, we may see more upgrades and a continued rally as institutional buyers continue to buy. I have seen links showing that there are mutual funds that have bought Sirius. Someone should post those. We may see those positions increase as positive guidance is forthcoming. In short, there is really no chance of the company failing and only positive movement into the future.
Congrats to those who held onto their Huevos and SIRI.
Please keep me in mind in regards to the party. Vegas would be great!
Run Blue Dog Run!
If the NAB is forum shopping now, shame on them for not being better prepared. As far as a restraining order....What Judge in their right mind or wanting their career to continue, would issue one now, especially if as you say, we have an independent federal judiciary. I'm not a lawyer, just using a little common sense.
And oh, before I forget, there is one more thing: I own a handful of Sirius stock and when it comes to politics, I tend to stand more down the center with a slight lean left. And with this F.C.C. vote, there is the irony: It was the right-leaning REPUBLICANS who may have saved a portion of my financial future by voting FOR this thing! My Republican friends are going to hammer me with Bill O'Reilly baseball bats as they gloat on this one....
You won't regret it.
"going down after market even after the anouncement"
Come Monday the shorts will have to cover and SIRI shoots up. How high I do not know but I would not be suprised to see the momentun carry it well above $4 by the end of the week. Then it will settle down and start to rise.
All this depends on the overall market direction next week and what Mel says on the earnings call. I think the market will be up due to the certain passage of the FRE/FNM bailout bill which will help the financials, plus oil will continue to fall. If Mel also delivers a very positive message, the stock could go above $5 within 2 weeks.
Stan Muse
chicago gary, first of all why did you change your name? You are going to love DSX the projected dividend is between .90 and .93 cents this quarter. Besides that, dont you remember I told "seriously sirius" when he asked that question, that when it comes to Vegas, the more the merrier.
Scot's Slant, I have no problem with you being a democrat or independant leaning left. At the very least you are reasonable to be able to realize that it was the democrats that were the ones against this merger. There are some that still blame the republicans for this. I have to tell you I am a consevative republican, and if I felt that for one moment that it was the republicans on the FCC, that were the reason this merger was not going to pass I would be calling them and writing them everyday. Telling them; GOD DAM IT, THERE ARE THINGS MORE IMPORTANT THEN THIS MERGER AT STACK HERE, SO GET YOUR HEADS OUT OF THE SAND AND GET IT APPROVED. BEFORE WE LOSE 10 MILLION VOTES IN THE NEXT ELECTION. Making them aware that they were appointed to the FCC board to hold up our republican values. I will leave you with this final thought. As you can see the democrats on the FCC, upheld their values when they voted against this merger.
killerkaul, I use to do that with Global Crossing, and I was making money left and right, then they filed chapter 13 and I made a whopping 157.00 over 5 months and about 400 trades, so I am just saying be carful, but you know that already. I just wont do it again, It only takes me almost getting burned once, to say no more of that.
Stan, You know I respect you and your schooling in this area. While I think it is a possibility to get to 4 I just dont think 5, is in the cards in 2 weeks. If we were talking about this back in Dec./Jan. I would agree. The facts are this has taken too long almost everyone is scidish and sick and tried of this. They are looking for any reason to get out. Then again I never thought it would go from something like 2.3 to 9 in a few weeks ether, about 2.75 years ago. So while I would hope you are right I just dont think it will happen. Case in point, I am a strong believer in the long run of satellite radio. But as I did before, and said I would do again, that even I would start to sell my long holdings in the company. But to show you how much I believe in you, I will put in a order today to sell 5,000 at 4.8 just in case.
cos1000, I think you are correct. I to beileve that if, E*trade and Scottrade are correct about the 28th that Mel would wait till he gives the quarterly report. The problem is both are rarely right on those estimates when the quarterly reports come out. I also think that if Mel doesn't come out with something by Monday regaurdless about this merger, then something is up. Then we would once again see the stock go down. People at this point need to see absolute conformation that the merger is a go, and things are progressing at break neck speed, as you already know.