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Sirius, XM Overwhelmingly Vote For Merger

11/19/2007 02:00:00 AM Eastern

Shareholders of Sirius Satellite Radio and XM Satellite Radio— two of the fiercest competitors in consumer electronics— voted in separate meetings last week to merge their companies pending federal approval.

Sirius said more than 96 percent of the shares voted in favor of the transaction, and XM said more than 99 percent of the shares voted for the merger.

XM stockholders will receive a fixed exchange ratio of 4.6 shares of Sirius common stock for each share of XM they own. XM and Sirius stockholders will each own approximately 50 percent of the combined company.

The merger must also be approved by the Federal Communications Commission (FCC) and the Department of Justice (DoJ).

While many Congressional members have voiced opposition to the merger, some analysts believe it has a 60 percent to 70 percent chance of passing federal regulation. Many expect the merger could be approved by the end of the year. If the FCC adheres to its time clock, its ruling would come in early December.

Sirius CEO Mel Karmazin said in a Nov. 9 interview with the Chicago Tribune that Sirius will sue if the FCC does not approve the merger. A Sirius/XM spokesman confirmed the statement but offered no elaboration.

Recently, XM and Sirius reported that former FCC chairman Reed Hundt voiced support for the merger in an interview on Nov. 9, whose transcript was filed with the FCC. Hundt was chairman at the time the FCC set the rules for satellite radio licenses in 1997.

A satellite radio statement quoted Hundt as saying on Sirius and XM: "These two firms have proved when kept apart to be incapable of mounting the really serious competition against … terrestrial radio that I had always hoped for. And it seems to me that there's no indication of any anticompetitive outcome if they do combine, so let's give them a chance to have a sharper point on the arrow and see if they can do better in terms of penetrating the listener audience."

Hundt also addressed the original FCC policy on satellite radio that states "one licensee will not be permitted to acquire control of the other remaining satellite DARS license."

Hundt said, "It was never the case that these service rules were intended to be written [in] concrete or, like the Constitution of the United States, changed only through an elaborate process. It was an attempt to figure out a good way to get the satellite radio industry off to a pro-competitive start and then in the fullness of time the FCC and the parties and the people in the industry would be able to see, well, what works and what doesn't work, what's happening and what isn't happening."

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