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Paul Larkin, Jul 26, 2007
On February 19, 2007, America’s two satellite radio companies -XM, based in Washington, D.C., and Sirius, based in New York City- proposed a merger of the two firms. The union would be accomplished by an exchange of shares that would leave each company’s stockholders owning half of the new firm, which, according to estimates made at the time of the announcement, would be worth approximately $11-13 billion. The parties hope to conclude the merger by the end of 2007, with a March 1, 2008, “drop dead” date, allowing either party to walk away from the deal if it has not been approved by then.
The proposal, which had been the subject of speculation for months beforehand, generated immediate controversy within the media industry, on Wall Street, in the legal community, and on Capitol Hill. Proponents of the merger, such as Sirius CEO Mel Karmazin, who is projected to become CEO of the new, as-yet unnamed company, said that the union will enhance efficiency in several ways. For example, the merger will eliminate redundant operating expenses in areas such as marketing, customer care, equipment, and research and development. The merger also will allow the new firm to abandon duplicative content offerings, to offer consumers a more extensive range of new programming options, and to target “underserved communities.” And the merger will allow the remaining firm...