DOJ Clears XM-Sirius Merger; Waiting On FCC; ‘Not Likely To Harm Consumers’
By Joseph Weisenthal - Mon 24 Mar 2008 12:35 PM PST
The merger of satellite radio operators Sirius (NSDQ: SIRI) and XM (NSDQ: XMSR) has been cleared by the DOJ. This is a significant hurdle, though FCC approval is still required for the deal to close. That could come soon, if increasingly loud chatter is to be believed. And FCC Chairman Kevin Martin has indicated in the past that the agency would likely announced its decision after the DOJ.
From the DOJ’s Statement: “After a careful and thorough review of the proposed transaction, the Division concluded that the evidence does not demonstrate that the proposed merger of XM and Sirius is likely to substantially lessen competition, and that the transaction therefore is not likely to harm consumers.”
The DOJ also supported a critical economic point, that the satellite radio operators compete in a market that’s bigger than just satellite radio: “The Division found that evidence developed in the investigation did not support defining a market limited to the two satellite radio firms, and similarly did not establish that the combined firm could profitably sustain an increased price to satellite radio consumers.”
In a section called “Effect of Technological Change”, the DOJ predicted that the companies would eventually come against new competition in the wireless realm: “Most notable is the expected introduction within several years of next-generation wireless networks capable of streaming Internet radio to mobile devices. While it is difficult to predict which of these alternatives will be successful and the precise timing of their availability as an attractive alternative, a significant number of consumers in the future are likely to consider one or more of these platforms as an attractive alternative to satellite radio.”
The two companies, which have been stuck in regulatory purgatory for over a year—the merger was first announced February 19, 2007—are trading up on the news. XM has spiked 13 percent to about $13.50, while Sirius is up about 4.8 percent to $3.04.
WSJ: “While it is unlikely that the FCC will go against the Justice Department’s ruling, it has the power to impose conditions that might make the controversial merger slightly more palatable to the groups lined up against it.”
Posted in: Legal, Regulatory, Money, VC M&A, Mergers & Acquisitions
