By Kim Hart
Washington Post Staff Writer
Wednesday, November 14, 2007
Shareholders of XM Satellite Radio Holdings and Sirius Satellite Radio yesterday voted to approve the proposed $5 billion merger of the two companies, though the deal still faces scrutiny by federal regulators.
Sirius shareholders also approved the issuance of stock to help the company pay for the deal with its larger rival XM, of the District. Under the merger proposed in February, XM shareholders would receive 4.6 Sirius shares for each XM share.
Sirius said more than 96 percent of the shareholder votes cast were in favor of the deal. XM said 99.8 percent of shares voted were in favor of the deal. XM shares rose $1.33, to $15.06. Sirius shares rose 22 cents, to $3.63.
The companies, which have never been profitable, say a merger would allow them to save money on programming and offer reduced prices. Consumer advocates opposing the merger argue that a monopoly satellite-radio company would reduce programming and raise prices. The Justice Department and the Federal Communications Commission are reviewing the deal. The FCC asked the companies this month to provide more information.
While it has no effect on the regulatory decision, the shareholders' approval signals that the companies are confident the deal will go through, said April Horace, an analyst at Janco Partners.
"The vote just sets them up so they can move forward quickly if they get approval," Horace said.
Approval of the deal hinges on how regulators define the audio-entertainment market, she said. XM and Sirius have argued that they have many competitors, including iPods, traditional radio, cellphones and online music services. Merger opponents say the companies' product is unique and that the combined company would eliminate competition.
The merger also was endorsed by Reed E. Hundt, who was FCC chairman when XM and Sirius received separate licenses to operate. The commission prohibited the firms from merging, though the rule can be changed.
According to a transcript of an interview filed yesterday with the FCC, Hundt said combining the companies would create a larger competitor for traditional radio stations.
"And it seems to me that there's no indication of any anti-competitive outcome if they do combine, so let's give them a chance to have a sharper point on the arrow and see if they can do better in terms of penetrating the listener audience," Hundt said.