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Thread: SIRIUS Satellite Radio Announces Post-Merger Financial Guidance

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  1. #1
    zcurzan is offline
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    SIRIUS Satellite Radio Announces Post-Merger Financial Guidance

    SIRIUS Satellite Radio Announces Post-Merger Financial Guidance for the Combined Company
    PR Newswire
    Posted: 2008-06-30 09:00:00
    NEW YORK , June 30 /PRNewswire-FirstCall/ -- SIRIUS Satellite Radio (Nasdaq: SIRI ) today announced financial guidance for 2009 assuming the completion of the merger of SIRIUS and XM Satellite Radio Holdings Inc. Based upon the company's preliminary analysis, it announced that:




    -- Total synergies, net of the costs to achieve such synergies, for the combined company are expected to be approximately $400 million in 2009;




    -- Adjusted EBITDA for the combined company is expected to be approximately $300 million in 2009. Adjusted EBITDA is net income/(loss) before interest and investment income, interest expense (net of amounts capitalized), depreciation expense, and non-cash stock compensation expense; and




    -- The combined company is expected to achieve positive free cash flow, before satellite capital expenditures, for the full year 2009.




    To date, neither SIRIUS nor XM has reported positive adjusted EBITDA or achieved free cash flow for a full year.




    "The upside potential from this merger is significant. In addition, the synergies, adjusted EBITDA and free cash flow are expected to continue to grow in subsequent years, and we look forward to providing more detail of this growth in coming months," said Mel Karmazin , SIRIUS Chief Executive Officer and the previously announced CEO of the combined SIRIUS and XM.




    The closing of the pending merger remains subject to the approval from the Federal Communications Commission and satisfaction of other applicable conditions, including the refinancing of certain XM debt. On March 24, 2008 , the U.S. Department of Justice informed SIRIUS and XM that it had ended its investigation into the pending merger, that it had concluded that the merger is not anti-competitive, and that it will allow the transaction to proceed. SIRIUS and XM each obtained stockholder approval for the pending merger in November 2007 .




    The company's financial guidance for total net synergies, adjusted EBITDA and free cash flow assumes, among other things: that the merger will be consummated in the third quarter of 2008; that XM will incur certain incremental interest expense as a result of refinancing certain of its debt; that the combined company will realize certain additional advertising and subscriber revenue synergies as a result of the merger; and that the combined company will achieve cost savings and efficiencies in nearly all aspects of its operations. No assurance can be given that any of these objectives will be met or that the amount of incremental interest at XM will not exceed that anticipated by the company. Furthermore, the company's financial guidance also assumes that the combined company will, following the consummation of the merger, immediately take steps in nearly all operational areas to rationalize its operations and realize the expected synergies in a timely manner, but no assurance can be given that the necessary measures to realize expected synergies will be implemented in a timely manner.




    When the merger was structured, the parties determined that SIRIUS would be the surviving public parent company and that XM would become a subsidiary of SIRIUS. As a result, the preponderance of XM's existing debt will require refinancing in connection with the merger. Because of the refinancing, the combined company expects XM to incur incremental interest expense as a result of refinancing certain of its debt. Principally as a result of this higher interest expense at XM, among other factors, substantially more of the free cash flow before satellite capital expenditures in 2009 is forecast to be realized at SIRIUS, the parent company, than at XM. In addition, SIRIUS and XM expect to refinance certain debt in 2009 that is scheduled to mature during that year.

    http://money.aol.com/news/articles/q.../rfid117437052

    Thanks crfceo for the story!
    Last edited by zcurzan; 06-30-2008 at 09:32 AM.

  2. #2
    zcurzan is offline
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    This is definitely good to see. It's strange because they've been so tight lipped about forward guidance up to this point. I kind of assumed they were doing it for two reasons:
    1. to not seem overly presumptuous that they were going to be approved
    2. they didn't have any real indication of what kind of savings could be achieved because they didn't know what kind of conditions would be placed on the merger


    Definitely an odd move on their part, but I'm taking it as good news. What do you guys think?

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    for starters, i guess there was something to the rumor! (omg, duh!) All I said was wait for today. Now we know what it was about.

    I don't see any possible reason other than to appease Goldman's analyst for this to have been done.

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    zcurzan is offline
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    Good point. It would make sense that the OT work at XMSR was for this. How do you think the market is going to react to this news?

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    zcurzan is offline
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    And another question:

    Is this any indication of what kind of synergies can be achieved in the long run? I mean, is there a way to reconcile these to lend credit to either Citibanks $7 billion in synergies or another analysts smaller expectation. Or at this point, is that all speculation and guesswork.

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    one959 is offline
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    Quote Originally Posted by zcurzan View Post
    And another question:

    Is this any indication of what kind of synergies can be achieved in the long run? I mean, is there a way to reconcile these to lend credit to either Citibanks $7 billion in synergies or another analysts smaller expectation. Or at this point, is that all speculation and guesswork.
    I think they could have done a much better job of explaining that with regards to their LONG TERM synergies and still kept it non-committal;

    Something along the lines of "such synergies, for the combined company are expected to be approximately $400 million in 2009 AND further substantial ammounts in 2010 and forward"

    After all 400 mil is a long ways from the lower 3 billion number being tossed around by analysts, even if it's understood that that last figure was "total long term synergies".

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    one959 is offline
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    Quote Originally Posted by zcurzan View Post
    How do you think the market is going to react to this news?
    Not good thus far (I'm sure you know that).....I think I picked a bad time to stop smoking crack. OOOOOH the pain.

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    homer985 is offline
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    Quote Originally Posted by zcurzan View Post
    Good point. It would make sense that the OT work at XMSR was for this. How do you think the market is going to react to this news?
    No offense, but not a chance. These two companies have a very good idea of each others finances at this point, to be able to put forth a rough estimate on forward looking guidance. Don't kid yourself into thinking that they needed to burn the midnight lamp, just to be able to figure out that they would have $400 million in synergies the first year -- and $300 million in adjusted EBITDA. You don't have to look that closely at your numbers to be able to figure that out.

    Why put in OT to close the quarter? Simple. It takes time to close out a quarter -- days, if not a couple of weeks. If the merger is close to be consumated, then the sooner the better. The problem is, if they're in the middle of closing out the quarter and the merger comes down -- it will delay the close of the merger.

    Thus, they close the quarter as early and quick as possible, like they are. Then if they get FCC approval in the next week or two, they will be able to close out the last couple of weeks very quickly -- and can likely close the merger within a day, at the most.

    I have no doubt that they're busting ass to get their numbers crunched and all -- the last thing they want is to get FCC approval, only to have it delayed a week or so while they close out Q2's books, as well as prepare for closing out the merger. In the time that that may be going down, it gives the NAB (or others) a chance to formulate options to challenge the FCC's decision in the Court of Appeals. Or any other number of blockades...

    No way, they'll want everything done and out of the way so that if/when the FCC greenlights it -- it's going to be consumated and closed so fast, your head is going to spin.

    As I said in the other thread, the Dow Jones blurb had nothing to do with this Sirius PR.

  9. #9
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    Quote Originally Posted by homer985 View Post
    -- it's going to be consumated and closed so fast, your head is going to spin.
    I certainly agree with this, if you guys recall, in the past when Mel has been asked how quickly after the approval could the companies close the deal he has stated something very close to; "we'll be filing the paperwork the very next morning".

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    Quote Originally Posted by crfceo View Post
    for starters, i guess there was something to the rumor! (omg, duh!) All I said was wait for today. Now we know what it was about.

    I don't see any possible reason other than to appease Goldman's analyst for this to have been done.
    Just playing devil's advocate here and trying to stay positive about our prospects..............maybe the co's know the cat is in the bag (that they will get the approval) but don't want to let it out yet for obvious reasons?


    And as crfceom stated, a good way to chase the wolves off the front door and help out us small investors (my thought).

    Boy what a fairytale land I live in huh?

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