Sirius and XM Satellite Merger Set for Approval; RBC Lowers Price Targets

Analysts at RBC Capital Markets lowered their target prices on XM Satellite (XMSR)  and Sirius Satellite (SIRI) radio companies ahead of expected FCC approval of their proposed merger.

In a note to clients last week, the team of analysts wrote that certain FCC-imposed conditions to the merger could offset some of the expected $4-billion in synergies, with proposed price freezes and a la carte programming likely to have the most impact.

However, the biggest hurdle - or the issue most likely to delay the merger - is debt covenants at XM on about $1-billion in notes, which will likely have to be repurchased in the form of consents at a cost of up to $100-million.

In addition, the two companies have about $700-million in combined convertible debt due next year that the analysts say will likely have to be refinanced at a higher rate, thus squeezing the combined company's cash position.

RBC downgrades its target price on XM to C$11 from C$13, and does the same for Sirius to C$2.50 from C$3.00.

Comments

[Plowboy]

Despite the noise made by the minority:

92% of all Congressman have not objected to this merger orally or in writing. 85% of all Representatives have not opposed this merger orally or in writing. 74% of all States AG's have not opposed to this merger orally or in writing. Some polls suggest that when asked roughly 3 out of 4 Americans or 75-80% don't oppose this merger.

These are numbers higher than the margin of any President or Congressman. So why has this merger taken 8 months longer than the 82 Billion dollar Exxon-Mobile deal when it's only radio?

Because 100% of the NAB opposes this merger and contributes more than a billion dollars annually to campaign contributions and speaking fees of your elected officials.

The NAB owns Congress and Kevin Martin has allowed Congress to take over the people's agency.... The FCC

[mgn]

Keep on writing, calling, send emails to your senators, congressman, and FCC Commissioners

[skyking]

ok let's all do this on the same day.......no taxation wo representation ...they had it right 232 years ago

[tech man]

it is a shame when our congressman and senators are brought and paid off with funds from various organizations. what happened to integrity, honesty, and just plain doing the right thing, and not being bought off. the laws at hand ask why people break the law well, when our own officials are corrupt and take kick backs what do they expect from the average person. this is a shame and a disgrace. just do the right thing. t.m.

[verggreatness]

I don't think the merger is going to happen now...The FCC is just waiting until one of these companies go under.

[tech man]

i believe that the merger is going to happen, however, it concerns me as a citizen of this great nation, that we are living sad times when it takes so long to make decisions by the FCC and other agencies that the people appointed to do the job. getting kick backs and other unethical things. the merger is not a conflict of interest, it is solid good bussiness sense. everyone can see fact. it is not a monoploy but a good business transaction. merging to two companies together gives them more chances to be the best quality sat. channels together. we need that. So fcc get off your duff and do your job and approve this merger. This has gone on for far to long. T.m.

[shure46]

Amen to all of the above !!!!!! and these "concessions"... are rediculous .....If satellite radio were to charge too much , or if the services became less than desirable , then people would simply bail !!!! This is not a matter of life and death for cryin' out loud !!!! It's a frickin' radio !!!!!! geesh .....I for one am going to email the FCC again ......everyone that cares , do the same , let's keep it civil , but express our opinions .....I realize we are against a powerful lobby , but let's all send an email ....can't hurt ....um , can it ?????? remember , let's be civil .....I for one feel like venting big time , but will try my best to contain my anger at this insane delay on a simple decision that should have been a yes long ago ....

[User 213962]

I agree with tech man. This is very shame and govt. has to form an agency to control FCC. This is not good for economy.

[PROTECT ANDSERVE 0310]

July 1, 2008
VIA ELECTRONIC FILING
Marlene H. Dortch
Secretary
Federal Communications Commission
445 12th Street, SW
Washington, D.C. 20554
Re: Notice of Ex Parte Presentation; Consolidated Application for
Authority to Transfer Control of XM Satellite Radio Holdings Inc.
and Sirius Satellite Radio Inc., MB Docket No. 07-57
Dear Ms. Dortch:
In accordance with Section 1.1206 of the Commission’s rules, 47 C.F.R. § 1.1206,
this letter notifies the Commission that on Monday, June 30, 2008, the undersigned,
Executive Director of The Latino Coalition, and Commissioner Deborah Taylor
Tate discussed comments previously filed by The Latino Coalition in the docket of
the above-referenced proceeding and urged prompt approval of the merger.
Respectfully,
/s/ Allen Gutierrez
Allen Gutierrez
Executive Director, The Latino Coalition
cc: Commissioner Tate

[PROTECT ANDSERVE 0310]

hey lets get the approval................. it on too Commissioner Tate
FCC dont read email............so lets send them faxes after faxes demanding their approval on merger.

[PROTECT ANDSERVE 0310]

This merger will be soon, if not we should file a class action lawsuit againist the FCC. how dare them try to out shadow the Department Of Justice.

[Plowboy]

The Congress rules the FCC (by default by the FCC) and the NAB rules the Congress with cash and speaking fees.

[Merger Mania]

How soon is soon? Kevin Martin said the merger approval would happen soon, but that was nearly a month ago. Now all these companies such as RBC, Goldman, and now Citi have lowered their price targets for XM and Sirius. What gives?

[Gregg]

This merger has been an eye-opener to me and I'm sure many other loyal subscribers. Sure, I knew gov't was influenced by the lobbyists but I never thought they'd be able to go so severely against the will of the consumer and delay this thing.
Have you ever seen a merger so overwhelmingly endorsed by consumers? Everyone wants this except the NAB and the HD Radio people!
Please FCC, give us our wish. Let us save this great thing - Satellite Radio. I'll never listen to FM or AM the same way.

[pain]

What I find amazing is the fact that everyone says that Sirius paid too much for Howard and that is why we are in trouble. But CBS paying Rush $400 million justifies every dollar! That was a great move.

[163888]

verggreatness, We all heard that before the DOJ approved and what a suprise with no concessions. Then we heard the same thing again before Martin said it should be approved with what, I would call reasonable concessions. I am just saying dont lose the faith, remember the history.


Now as to RBC, and what they have said I just dont get it. Do they not do research on the companies they give analysis on, or are they that dumb. The concessions that Martin has called for, all but one or two have been told by SIRI/XMSR, would be part of what they were planning on doing anyway, most of which have been out for some time and the other (8 channels to minorities) was out before their last analysis. As to the one that is, open access is not going to be anything that I can see would hurt the sector, and if anything if done the right way should actually help. The second which is Puerto Rico is at most a small extra cost for a few extra subscribers. Which if they could get 1/10 of 1 percent of the population will pay for itself.


pian, While I agree with you that SIRI did not over pay for Stern (they paid, what he was bidded up to, supply/demand it is as simple as that). Stern is also paying for his own cost he gives SIRI over 250 million in revenue and cost them 140 million. I have said this before as you know. Where I disagree with you is that, while Stern is paid 140 million a year by SIRI for sole distribution rights. Rush is only going to be paid about 50 million a year, his contract is for 8 years. I do think the flip side of that is, SIRI would have to pay Rush at least as much as Stern. Because most people that say Stern was over paid for, have no clue what *sole rights* means. Rush makes alot more in other things like the "limbaugh letter" and his pod cast,ect.,ect. I have no dought that if he had to give these things up (which he would never do) he would expect and get alot more. When was the last time you saw Stern on A&E. That is a perfect example of what is cost to get sole distribution rights. Mel knows "content is king" and also why you cant get most of the talent anywhere else except on SIRI. I think one of the first pieces of fat to be cut, when they get both totally together will be Ophra. Now there was a waste and was over paid. She was paid as much as Stern if to go into the amount of hours each gives each company.

P.S. pain, all of the last comment was not directed to you.

[shure46]

don't count me in on that , 400 million for rusky is rediculous in my opinion


On Jul 06 08:41 PM pain wrote:

> What I find amazing is the fact that everyone says that Sirius paid
> too much for Howard and that is why we are in trouble. But CBS paying
> Rush $400 million justifies every dollar! That was a great move.

[alfi]

Does anybody know? After the merger, can Mel say, "We are more than happy to freeze prices and offer ala cart programming, but we're not sure when exactly we're going to start. It may take us a couple years to decide." Does Sirius have to start these concessions 'day one' after approval, or can they drag it out to recoup some of their loses because of the delay? Just wondering.

[muley101]

The merger will happen for sure. I strongly disagree with RBC and others who peg SIRI at anywhere below $4.00 by year end 2008.

These analysts are only looking at what they can see today, and ignoring the future. As an example, what if ((XS)) partnered with APPLE to provide internet radio to over 20 million iPhones? There are some very obvious synergies there besides more subscribers for satilite radio. Apple's music sales have not been very profitable to date. But if they could capture the current song playing and allow the listener to instantly order the song, their music sales would probably double. Apple iPhone sales would also get a boost and both companies will gain significant mindshare. I am speculating here, but I see a very strong ((XS)) and Apple partnership in the very near future which will relieve all of our debt problems. And, this is just one future possibility.

[muley101]

The merger will happen for sure. I strongly disagree with RBC and others who peg SIRI at anywhere below $4.00 by year end 2008.

These analysts are only looking at what they can see today, and ignoring the future. As an example, what if ((XS)) partnered with APPLE to provide internet radio to over 20 million iPhones? There are some very obvious synergies there besides more subscribers for satilite radio. Apple's music sales have not been very profitable to date. But if they could capture the current song playing and allow the listener to instantly order the song, their music sales would probably double. Apple iPhone sales would also get a boost and both companies will gain significant mindshare. I am speculating here, but I see a very strong ((XS)) and Apple partnership in the very near future which will relieve all of our debt problems. And, this is just one future possibility.

[SPR]

The FCC has delayed this merger so long it is no longer an attractive proposal. I think Sirius should withdraw their offer. The merger is all downside for Sirius and upside for XM. In such case, I give XM a year and they will be filing bankruptcy, then Sirius can pick up those customers with no FCC interference.

[SPR]

The FCC has delayed this merger so long it is no longer an attractive proposal. I think Sirius should withdraw their offer. The merger is all downside for Sirius and upside for XM. In such case, I give XM a year and they will be filing bankruptcy, then Sirius can pick up those customers with no FCC interference.

[SPR]

The FCC has delayed this merger so long it is no longer an attractive proposal. I think Sirius should withdraw their offer. The merger is all downside for Sirius and upside for XM. In such case, I give XM a year and they will be filing bankruptcy, then Sirius can pick up those customers with no FCC interference.

[SPR]

The FCC has delayed this merger so long it is no longer an attractive proposal. I think Sirius should withdraw their offer. The merger is all downside for Sirius and upside for XM. In such case, I give XM a year and they will be filing bankruptcy, then Sirius can pick up those customers with no FCC interference.

[SPR]

The FCC has delayed this merger so long it is no longer an attractive proposal. I think Sirius should withdraw their offer. The merger is all downside for Sirius and upside for XM. In such case, I give XM a year and they will be filing bankruptcy, then Sirius can pick up those customers with no FCC interference.

[SPR]

Sorry about the multiple postings. Glitch with my access.

[muley101]

me too. the SA server must have gone down

[kennyk]

E-mail or fax your response to the FCC about how you feel about the merger it only takes a few minutes of your time to do so, fill their in box and fax tray with your and my Lettres. Thanks lets do IT>

[mikemichaelson]

Sirius and XMSR have a combined 2,000 employees. The government is willing to block the merger of these two and forgo 2,000 jobs to hard working Americans and rather send out $500 checks to people once again, further diluting the value of our dollar and increasing the growth of inflation. And they wonder why people all over the country are complaining about what is wrong with this country...

[thepeople]

This is the way of the Bush presidency, the worst in our history, getting money is all they care about, they have rapedtheUSA. I hope theyburninhell and earth. I have had it with our best government money can buy and lack of a government for the people, I hope everyone will do the same thing I am and vote in every election, vote every incumbent out until they represent the people who vote them in not the people who bribe them.