Sirius Satellite Radio (SIRI) executives are looking at a potential merger with XM Satellite Radio (XMSR) hoping the move would bring strong gains for investors.
Just the mention of the possibility boosted the stock prices for both companies this week, with Sirius' stock up 5 cents and XM's up 11 cents.
The WashingtonPost.com quotes two speeches that Sirius executives gave in New York yesterday alluding to the possible combination of the two radio companies bringing "significant benefits" and "value creation."
"Consolidation creates value . . . particularly when you are in the same industry as another company to be able to combine," Sirius chief executive Mel Karmazin said. He and David J. Frear, Sirius's chief financial officer, spoke to analysts at a conference.
This isn't the first time that Sirius has hinted at wanting to merge and with both XM and Sirius dealing with slowing subscription growth and huge debt, speculation about how the companies would do together is common.
Neither company has actually earned any a profit, although XM states it should break even this year. They have more subscribers than Sirius - 8 million to Sirius' 6 million - but it also has $3 million more in debt, a total of $1.3 billion.
Of course there would be the difficulty of overcoming antitrust and monopoly concerns and the intrepretation of the satellite radio market by regulators would be key to the merger. If defined narrowly and strictly the XM-Sirius combination would be a monopoly power but if intrepreted broadly, to include on-demand MP3s or podcasts or traditional radio, a merger might have an easier time going through.
Read the full article here.
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