XM, Sirius shares drop on merger worries

LOS ANGELES (Reuters) - Shares of Sirius Satellite Radio Inc (SIRI.O) and XM Satellite Radio Holdings Inc XMSR.O fell more than 10 percent on Wednesday on worries their planned merger could be in trouble, analysts said.

Sirius Chief Executive Mel Karmazin told an investor conference on Tuesday that he had not yet "officially" heard from government regulators who have to approve the deal, but added that he was still confident the merger was on track.

Barrington Research analyst James Goss said investors were trying to determine from Karmazin's comments whether there was opposition at the Department of Justice, which will decide if combining the two U.S. satellite radio companies would be anti-competitive for consumers.

"I think one of the issues has been the speculation about whether the merger will take place," Goss said. "Today's sentiment seems to be 'no.'"

He added that the shares "had run up for awhile when it seemed like everybody was getting on board with the notion that it would take place."

On Nasdaq, XM fell 8 percent to $10.55 and Sirius dropped 5 percent to $2.82 at mid-afternoon.

"The merger between XM Satellite and Sirius was expected to be completed by the end of 2007 but this did not happen," said William Lefkowitz, an options strategist at brokerage firm vFinance Investments. "Therefore, some investors are concerned that this deal is running into problems and may never be completed."

(Reporting by Gina Keating in Los Angeles and Doris Frankel in Chicago, editing by Richard Chang)