Merger News

Well it’s about time. Sirius and XM have finally launched a website on their new domain name SiriusXM.com, which they recently acquired on September 3, 2008. As of today it’s still nothing special, just a simple landing page that directs visitors to each of the two services main websites.

It’s good to see the company trying to paint this rosy picture of everything being under one roof but, I find it ironic that in doing so they are still consciously sending visitors to two separate websites. This is not the kind of model they need to be flaunting to potential customers. Sirius XM needs to step it up and remove this line between, the still separate services, as quickly as possible.

[ Thanks Larry ]

In a filing that was published on the FCC website, AlphaStar has requested a meeting with Sirius XM Radio to discuss the possibility of AlphaStar being an entity that would provide content on the merged company platform as outlined in the FCC ruling.

AlphaStar stressed that they have the capabilities, infrastructure, and programming contacts to begin delivering programming and services immediately. Out of all of the proposals set forth regarding outside entities to become involved, the AlphaStar proposal seems to have the most potential.

Position - Long SIRI

Having spoken with Michael Hartleib, I will not write anything regarding our conversation as he has already offered his own opinion in the original story, but I would like to offer my own opinion on the case.

One of the questions I posed to him was; “Why did (he) wait so long.” I told him he would have had a much better chance had he filed before the two companies officially merged. Sirius XM is a brand new company now. Even the old stock certificates are no longer valid. They can’t go back and do a “do-over.”

I explained to him my opinion that in waiting so long to file, it gives the appearance that this appeal is from a disgruntled shareholder rather than a concerned one. If I were an attorney, I would argue that the appeal would not have been filed had the company stock risen to $10.00 a share. Waiting in my opinion has killed any chance of an outcome other than dismissal.

Further, a large part of the FCC’s order dealt exclusively with the interoperability issues brought up by Mr. Hartleib in his appeal, and were acknowledged in the memorandum dated 7/25/2008. Pages 50 -56 of the order deal exclusively with the issues raised by Mr. Hartleib, C3SR and the NAB. Continue Reading »

A few days ago, I touched on the fact that the much touted 4oo million dollars in synergies was a low ball figure. In an interview on CNBC today, Citi analyst Tony Wible agreed with me that the estimates are in fact conservative.

You may not have noticed it, but Tony makes a good point in the interview. He points out that auto sales have been declining for the last four years, yet Sirius (and Xm) managed to grow over the same period. I am now questioning why it is the street insists on tying satellite radio sales, with auto sales. It’s obviously a failed indicator.

Now that I have that out of my system, I had a thought regarding the synergies. We have all heard of the cost cutting benefits and the improved ad sales that may come. For a moment, I’d like to think outside of the box. After listening to Mel’s interviews today, it seems to me the company is less concerned with what will happen and is much more focused on what can be done immediately to improve its balance sheet.

Sirius Xm has a pool of nearly 20 million potential new subscribers that can be gained in this quarter in the form of former subscribers! At first you may think it impossible. I beg to differ. How many people canceled their XM service when Nascar moved to Sirius? How many GM owners would like Howard or the NFL? How many Ford owners would like Opie & Anthony, or Major League Baseball? With the best of both Sirius and XM coming soon, this is an obvious company resource.

A marketing campaign directed at this immense pool of potential subscribers through advertising, mailings and telemarketing could reap huge rewards. There are so many benefits to the merger that we can only begin to imagine the possibilities. Subscribers could potentially double in a single quarter. Now that won’t happen because Grandma is probably not going to pay for satellite radio for the 35 minutes she spends in the car each week.

Yet the resource exists, and unlike the outer shelf and Anwar, there is nothing stopping us from tapping it.  Additional “re-subs” together with increased penetration would knock Wall Street naysayers on their rears, and it it could be implemented right NOW. The road to profitability may prove to be paved, ironically, with years of lost subscribers.

Position: Long Sirius.

The merger is finally here. After a long and drawn out regulatory process, the birth of Sirius XM Radio has many investors singing the blues. The question is how long the street will stay on the blues channel, and will the next channel be more upbeat?

With the converts arbitrage action panning out during the trading of yesterday and today, it may well be that the stock has stabilized, and perhaps even marked a strong bottom that should become a very strong support point.

Many investors still have various questions, and the process of the transition still has a few more days to unwind. XM shareholders will see their accounts have shares that are able to be traded by this Friday. Those that were short XM will need to settle their trade, as the short positions do not transfer over. The XM shares you borrowed to sell short were bought by someone else, who has already (in theory) converted them to Sirius. Because of this, Friday may be an interesting trading day that sector followers will want to watch.

Continue Reading »

The merger between Sirius and XM is no longer “proposed”. It is reality. As anticipated, Sirius and XM consummated their deal prior to the market opening today, and the company has a new name… Sirius XM Radio Inc.

Among the announcements this morning were:

• Combined Company Has Over 18.5 Million Subscribers, Annualized Second Quarter Revenue Exceeding $2.4 Billion
• Company to Offer Consumers Best of Both Services, While Maximizing Significant Efficiencies
• SIRIUS XM Reiterates Financial Guidance; Expects 2009 Synergies of $400 million and 2009 Adjusted EBITDA of over $300 Million

Full press release after the jump…

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The FCC has finally put the merger between Sirius and XM into writing. The documents, made public after 4:00 PM on July 28th outline the regulatory approval of the merger. Four of the five commissioners also offered published opinions on the vote.

This official document, the lack of any action by the National Association of Broadcasters, and what should be the final touches on financing issues should enable Sirius and XM to consummate the merger in the next few hours. When this happens, XM shares will no longer exist.

Full press release after the jump…

Continue Reading »

As an investor in both Sirius and XM, I was very concerned with the drop in price following an exceptional quarterly report and subsequent SEC filings relating to an Xm debt offering. What we are seeing today is a common arbitrage play with regard to convertible debt offerings called convertible arbitrage. Such offerings are an open invite to short the common stock against the debt.

These XM convertibles will be converted to Sirius shares. Because Sirius shares are not available to short against, it would have made placement of the debt securities impossible. By providing the shares, Sirius aides in their placement. This is not shorting as we think of in a normal sense. These shares were not on the market to begin with. Other traders are selling into this which is the cause of the decline.

In the Goldman Sachs report, they expected the debt offering to be over 1 billion dollars. Giving credit where credit is due, they saw this coming. However, the offering today is for only half the amount Goldman’s analyst Mark Wienkes expected, at only 550 million, which may suggest the stock’s decline may be short lived and over-exaggerated.

A company executive said that the offering is necessary for the completion of the merger and relates to xm’s refinancing needs. He also noted that as yet, there has yet been no official press release nor any paperwork signed regarding the merger at the FCC, and that it was expected to close by the end of business today. With this offering, XM’s debt restructuring is complete.

Also of importance is that the company believes that the NAB will not be filing for a stay of the FCC decision.

Position: Long Sirius, XM.