New York — Capping months of rumor and speculation, XM and Sirius announced today they will merge with Sirius CEO Mel Karmazin to become CEO and XM chairman Gary Parsons to become chairman of the new company.
XM CEO Hugh Panero will continue in his current position until the close of the merger, which is expected by the end of the year, said the companies. The all stock merger of equals will create an enterprise valued at approximately $13 billion, which includes a net debt of approximately $1.6 billion.
A conference call discussing the merger will be held this morning, please check www.twice.com for updates.
A merger between the two companies was openly discussed by Parsons and Karmazin when each spoke at a Citigroup conference in early January. Both men stated at that time that a merger would benefit shareholders.
The new company’s board of directors will consist of 12 directors including Karmazin and Parsons and four members designated by each company in additional to one representative from General Motors and one from American Honda.
XM and Sirius said they will continue to operate independently until the transaction is complete. They will decide on a company name and headquarters location prior to closing of the merger.
The merger creates a company of 14 million subscribers and $1.5 billion in revenues based on analyst estimates.
Consumers will have the opportunity to "pick and choose the channels and content they want on a more a la carte basis." The merger will also create improved products such as real-time traffic and rear seat video, they said.
The transaction is subject to regulatory review from agencies including the Federal Communications Commission (FCC) and stockholder approval.
The FCC said in the past it would examine any merger proposals from XM and Sirius. FCC chairman Kevin Martin acknowledged earlier this year that there exists a prohibition on one company owning both satellite radio licenses, although analysts have noted that XM and Sirius could ask the FCC to modify their licenses to permit a merger.
Karmazin said in a prepared statement, "This combination is the next logical step in the evolution of audio entertainment. Together, our best-in-class management team and programming content will create unprecedented choice for consumers, while creating long-term value for shareholders of both companies. The combined company will be positioned to capitalize on Sirius and XM's complementary distribution and licensing agreements to enhance availability of satellite radios, offer expanded content to subscribers, drive increased advertising revenue and reduce expenses."