Sirius completes acquisition of XM Satellite
NEW YORK (Reuters) - Sirius Satellite Radio said on Tuesday it completed the purchase of rival XM Satellite Radio Holding Inc, forming a broadcasting company that competes with traditional radio as well as digital audio players like iPods.
The completion comes after a marathon period of government scrutiny that ended late last week when the U.S. Federal Communications Commission approved the deal, which was first announced 17 months ago.
The new company will be named Sirius XM Radio and will have more than 18.5 million subscribers, making it the second-largest radio business in the United States, according to Sirius.
Sirius reiterated that as a result of the deal it expected to save about $400 million in 2009, and earn $300 million in before interest and investment income, and interest, depreciation and non-cash stock compensation expenses, otherwise known as adjusted EBITDA, Sirius said.
Both savings and adjusted EBITDA will continue growing beyond 2009, it said.
Shareholders may also have to wait to reap the benefits of the new company, analysts said. Neither XM nor Sirius has ever posted a net profit, and have recorded billions of dollars in losses building their operations.
"While merger is beneficial for Sirius, we remain cautious as significant execution risk exists implementing synergies and recognition of synergies is probably already priced into stock," said RBC Capital Markets analyst David Bank in a note to clients.
The new Sirius XM will boast a roster of exclusive programming, ranging from channels dedicated to personalities such as Howard Stern, Oprah Winfrey and Martha Stewart to professional sports broadcasts, news and music.
But it still faces many challenges. For example, retail sales of satellite radios have cooled since the deal was announced and consumers hurt by the weak U.S. economy may think twice about paying $13 a month for radio.
Existing radios will continue to work and every subscriber has the option of maintaining their current service package.
Sirius XM's corporate headquarters will be in New York. XM Satellite Radio, the company's wholly-owned subsidiary, will remain in Washington.
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