"I happen to like Sirius better than XM. If the deal fails, Sirius will be more likely to survive than XM. So let's get rid of XM, and let's buy Sirius."
This presents an interesting dilemma for satellite radio investors. On one hand, the arbitrage premium is not up to over 11%. This represents 3 points more than the close on Friday. Arbitrage players that believe a merger will pass find the XM side of the investment interesting, as it delivers a 10% or so profit if the merger passes. However, some people are still unsure about a stance on the merger, and simply want to play the better company. According to Jim Cramer that company is Sirius.
An additional consideration needs to be whether either of these equities, or perhaps even both of them, would be buyout targets in the event that the merger fails. Rumors aside, both Sirius and XM have never really had possible buyouts built into their respective prices. In my opinion, a buyout of some nature could be in the cards if the merger does not come to fruition. Both Sirius and XM are trading at prices that could let a bigger company walk in and grab a deal. As far as speculation on something like that happening, your guess is as good as mine.
Cramer seems to now have Sirius on his radar screen again, and investors should not ignore that as they watch these equities. Like it or not, Cramer has some level of pull when it comes to moving stock prices. Better to know Cramer's stance than not.
Position - Long sirius, Long XM