Bit Players XM, Sirius Hold A High-Stakes Merger Game
Wednesday, July 25, 2007
By any conventional measure, the proposed merger between XM Satellite Radio and Sirius Satellite Radio is not a big deal.
Both firms are young; XM is barely 10 years old. Revenue for each last year was less than $1 billion, making them bit players in the media world. The only statistic that is remarkable is the size of their net losses: a combined $1.8 billion in 2006.
Yet in the Washington area, XM and Sirius are giants. They have spent millions of dollars to gain regulatory approval for their union. And their chief opponent, the National Association of Broadcasters, has spent a small fortune to block it.
The reason is an object lesson for the nation's capital: Government has grown pivotal to the business world and, in some cases, its decisions are make-or-break for individual companies or industries.
The XM-Sirius merger is one of three pending transactions that would be immensely affected by federal actions. Cerberus Capital Management's acquisition of Chrysler could be set back if significantly tougher fuel-efficiency standards become law, and the purchase of the student-loan company Sallie Mae by a private-equity group could be killed or re-priced if student-loan subsidies are slashed.
In the case of XM and Sirius, federal refusal to permit the merger could be a death sentence for one or both, analysts said.
The companies deny this, but they agree that the stakes are so high that they have been compelled to mount a massive, multifaceted campaign to persuade Washington's decision-makers to approve the merger. Losing would be a major failure for the companies.
Few other industries have put together as much firepower for a single issue. Their effort includes a dozen lobbying companies and another dozen law and public relations firms. Advertising and investment banking assistance is layered on top of that.
"We felt that it's important to broadly educate lawmakers and others about this merger," XM spokesman Chance Patterson said.
The broadcasters are orchestrating an equally outsized response. "Being effective in D.C. means having high visibility, enlisting allies and using all the tools at your disposal to neutralize adversaries," said Dennis Wharton, executive vice president of the NAB.
Not long ago, lobbying armies were a fraction as large. Their size and specialization have increased rapidly in recent years, however, as the amount of money at stake in government decisions has swelled.
"When you have so much money involved with a particular issue, you have a feeding frenzy of lobbyists and activities associated with lobbying," said James Thurber, a political scientist at American University.