Save the Date, Satellite Radio
By
Rick Aristotle Munarriz
October 9, 2007
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The line has been drawn in the sand, and now some of that sand is going into an hourglass. Sirius (Nasdaq: SIRI) and XM (Nasdaq: XMSR) have announced separate shareholder meetings on Nov. 13 to tally shareholder support for the proposed merger.
There's no point in worrying about cold feet now. The vote is taking place nearly nine months after the companies announced their matrimonial intentions. If investors haven't been won over by the huge synergies -- and consumers haven't been swayed by the lower-priced plans -- there's little left for Sirius CEO Mel Karmazin to say to win them over.
Besides, it would be a shock if a majority of the shareholders aren't on board with the deal. Both XM and Sirius are trading well below the all-time highs set nearly three years ago. Subscriber growth without fiscal responsibility has been meaningless to Mr. Market. A combined company would be able to watch over more than 15 million subscribers with substantially healthier margins than each company on its own.
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12/04 Peak
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10/8/07
|
Loss
|
|
XM
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$40.89
|
$14.26
|
(65.1%)
|
|
Sirius
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$9.43
|
$3.45
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(63.4%)
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Obviously, getting its investors on board isn't the concern. The merger is being treated to rigid regulator scrutiny. After the proposed pairing of DirecTV (NYSE: DTV) and DISH Network parent EchoStar (Nasdaq: DISH) was squashed a few years ago, getting regulators to sign off on the deal before the Nov. 13 votes are counted won't be easy.
One way or another, expect a lot of that uncertainty to clear before the shareholder vote. XM and Sirius have jumped through every hoop tossed at them by the regulators. In the meantime, automakers have vindicated the claim that satellite radio is not a monopoly. Some carmakers have inked deals to include HD-radios and Apple (Nasdaq: AAPL) iPod jacks in new model cars. In other words, the auto buyer has a choice even beyond the FM, AM, and satellite radio dials.
If that still isn't enough, expect deal critics to act swiftly. It just isn't fair to keep teasing XM and Sirius this way.
More pre-nup reading:
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