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XM, Sirius announce merger

From CNN.com:

Following months of speculation, the two satellite radio operators will combine in a merger of equals; Karmazin will be CEO.
By David Ellis and Paul R. La Monica, CNNMoney.com staff writers
February 19 2007: 5:21 PM EST


NEW YORK (CNNMoney.com) -- Rivals XM Satellite Radio Holdings Inc. and Sirius Satellite Radio announced Monday they would enter into a merger of equals, creating a satellite radio giant.

XM (Charts) and Sirius (Charts) said they would each own half of the combined company, which would offer listeners a much wider variety of programming, including sports, news and high-profile entertainers such as shock jock Howard Stern.


Shock jock Howard Stern has been widely credited for much of Sirius's success, helping the satellite radio operator finish 2006 with more than 6 million subscribers. 
 
 
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As part of the deal, XM Chairman Gary Parsons would remain chairman of the combined firm, while Sirius' Mel Karmazin would assume the role of CEO. XM chief executive Hugh Panero will remain as CEO until the merger is completed.

The two companies, which have a combined 14 million subscribers, said they had not yet determined a new name for the combined company or where its headquarters would be located.

"This combination is the next logical step in the evolution of audio entertainment," Karmazin said in a statement.

The company would have a market value of roughly $13 billion, including approximately $1.6 billion in net debt.

XM shareholders would get 4.6 shares of Sirius stock for each share of XM they own.

The deal would value XM shares at $17.02, a 22 percent premium to its Friday closing price of $13.98.

Sirius and XM said as a result of the merger it hoped to offer listeners an "a la carte" option, allowing them to pick and choose the channels they wanted, such as Sirius' "Martha Stewart Living Radio" or XM's "Theme Time Radio Hour" with music legend Bob Dylan.

"The combined company will be better positioned to compete effectively with the continually expanding array of entertainment alternatives that consumers have embraced since the Federal Communications Commission (FCC) first granted our satellite radio licenses a decade ago," Parsons and Panero said in a joint statement.

Speculation has run rampant on Wall Street about a possible tie-up between XM and Sirius since the beginning of the year.

Both companies, although rapidly growing, have continued to lose money despite strong revenue and subscriber growth.