Stanford Group: Sirius/XM Merger Still Viable

By Amy Gilroy -- TWICE, 1/4/2008

Boca Raton, Fla.— Although 2007 closed without approval on the proposed Sirius/XM merger after 10 long months, analyst Frederick Moran of the Stanford Group still gives the deal better than a 50 percent chance of passing federal regulation within the next few weeks.

Moran said, “People are certainly reading into the delay past the end of the year. At this point we do not believe the delay in the Sirius/XM merger necessarily indicates that deal will not go through. The process at the Department of Justice is a complicated ongoing review … The fact that it’s taking longer than initially hoped for may indicate there is a greater deal of last minute scrutiny taking place but there’s no hard evidence to lead us to any conclusions as to whether or not this deal will be approved.”

He added that, “At the current time, we believe there’s still a slightly better than even chance that the merger will get approval and it will come within the next few weeks.”

Both the Deptartment of Justice (DoJ) and Federal Communications Commission (FCC), which must approve the merger, have been taxed with a number of merger and acquisition proposals, which could account, in part, for the delay.

Analyst Thomas Eagan of Oppenheimer noted, “Both the DoJ and the FCC have been pretty busy. The FCC has come out with a litany of regulations regarding the media industry.”

Moran agreed stating, “There were a number of mergers and acquisitions on the docket for approval by the end of the year that didn’t happen, including Clear Channel’s privatization, so clearly the satellite radio merger is not alone in missing its deadline.”

Even if the FCC postponed a ruling until June, the deal could be viable, said RBC Capital Markets analyst David Bank, claiming, following that time, given the upcoming presidential election, the FCC might choose to leave the decision to the next administration.

The merger agreement between Sirius and XM includes a termination clause whereby the parties can dissolve the merger as of March 1, although such clauses are often ignored said industry members.

Sirius and XM had hoped to close their merger by the end of 2007. A recent statement from the companies said, "As the companies have said from the outset, we expected to complete the processes at DOJ and the FCC so that the regulators could make their decisions and the merger could close by year end. We have fully complied with the requests from both agencies. The ball is now in their court and we look forward to their determinations."