DealZone

Sirius, XM see deal approval soon. Really?

March 12, 2008

nascar.jpgSirius Satellite Radio Inc Chief Executive Mel Karmazin said on Wednesday he hoped U.S. regulators would rule by the end of March on the satellite radio company’s proposed merger with rival XM Satellite Radio Inc.

Speaking at the Bear Stearns 21st Annual Media Conference, Karmazin said he “took heart” about recent comments by U.S. Federal Communication Commission Chairman Kevin Martin, who indicated that his agency aimed to rule on the deal by the end of March.

Shares of the satellite radio companies immediately jumped on hopes the deal could actually close soon. The stocks had been under pressure amid investors’ fears the deal could get blocked by regulators.

Shares of Sirius, whose programming includes “shock jock” Howard Stern and NASCAR auto racing, hit a high of $2.95 and traded at $2.86, up 11 cents, or 4 percent. Shares of XM, whose programming features Oprah Winfrey and Major League Baseball, hit a high of $12 and traded at $11.58, up 49 cents, or 4.4 percent in afternoon trading.

Karmazin’s predictions on timing, however, may prove false since the companies have been wrong before. The satellite radio companies previously predicted that regulators would sign off on their their proposed $4.2 billion merger by the end of 2007.

XM Satellite Radio Holdings Inc Chairman Gary Parsons was less specific than Karmazin when he spoke at the Bear Stearns conference. He merely said he was confident the regulatory review was moving forward “in a timely manner.”

The deal, which was announced on Feb. 20, 2007, must meet certain standards, such as being in the public interest and not harming competition, as some critics have claimed.

“Clearly if there was a big problem with the merger, it wouldn’t take the (regulators) this long to figure it out. Either you believe we compete with a whole bunch of audio choices or you think there’s a distinct market called satellite radio,” Karmazin said.

Phillip Zane, an antitrust lawyer with Baker Donelson PC, said “the market definition is crucial as it is in any antitrust case. If the market is only satellite radio, then the parties have a problem because they’re the only satellite radio.”

The Department of Justice appeared to have all of the information it needed on the deal, but the companies were having active discussions with the FCC, Karmazin said. Talks with the FCC had recently accelerated, he said.

Unless the DOJ sued to stop the proposed merger, the deal could close immediately after the FCC ruled, Karmazin said.

Still, the DOJ would be wary about bringing a case to block the deal unless it was sure it would prevail, Zane said.

“The market’s changed a lot just since the merger’s been announced,” Zane said.

(Additional reporting by Diane Bartz in Washington)
(PHOTO: Reuters)

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