Boutique Calling For Sirius-XM Approval (SIRI, XMSR)

There is an interesting note out of Stanford Group Company’s Paul Gallant calling for the likely approval of the merger between Sirius Satellite Radio (NASDAQ: SIRI) and XM Satellite Radio (NASDAQ: XMSR).  The research note states specifically "We believe the Department of Justice (DOJ) is near a ruling on the XM-Sirius merger, and we reiterate our belief that it is likely to win regulatory approval. "

It also noted a last ditch effort of an opposition group meeting with the DOJ and notes this is usually parties who are likely to lose the battle.  "As for timing, DOJ’s ruling could come any day now. Shortly after DOJ rules, we expect FCC Chairman Martin to recommend to his fellow commissioners the same outcome reached by DOJ. "

While this is a belief in support of the merger, Stanford does not conditions will still likely exist:

• requiring Sirius/XM to include HD tuners in each unit sold;
• restricting local advertising or local content;
• imposing terms for various pricing/a la carte commitments.

This merger has persisted almost exactly a year and has been one of the more fought over mergers from alleged consumer groups, although the defiant RIAA is opposing this more from a self interest than from a consumer protectionist group.  As always, follow the money and you don’t ever have to go too far.

Sirius shares are up 1.1% at $3.175, although shares were up as high as $3.25 today.  XM shares are up roughly 2.2% to $13.00, although it has traded as high as $13.35 today.

Please keep in mind that speculation on this has gone on and on: 

• In October CNBC ran something about a "bias toward approval" being the case.
• Barron’s sent shares lower in December on concerns it might not work out.
• Both proxy firms Glass, Lewis, & Co. and ISS have recommended for shareholders to approve the deal.
• We’ve even noted ourselves how XM looks like it was trying to make survival plans.

Both stocks were higher earlier in the day.  It is the belief of a673b.bigscoots-temp.com that no such concerns over competition are merited.  We also believe that this merger must go through for at least one of these satellite radio providers to survive, and that was our feeling before Joe Q. Consumer decided to start slashing and burning routine $8 to $100 regular monthly expenses where possible.  On last look there was a greater than 12% merger-arb spread on this merger, so it is still far from a done deal according to Wall Street and actual trading capital.

If this merger is actually and finally close, stay tuned.  There are going to likely be some large stock price changes either way.

Jon C. Ogg
February 12, 2008