Filed under: Deals, Law, XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI), Politics
Once again shares of Sirius Satellite Radio Inc. (NASDAQ: SIRI) and XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) are on the move. On Wednesday, shares of the two satellite radio companies got squashed due to concern over the merger review. XM shares tumbled 9.9%, or $1.45, to $13.21, while Sirius dropped 6.0%, or 21 cents, to $3.29.
Interestingly, lawmakers, who sometimes hold hearings about huge mergers but have no direct say, voiced their view on the merger, with the U.S. Home of Representatives antitrust task force expressing concern about the Justice Department review of Sirius’s proposed purchase of rival XM.
Reuters has obtained a copy of a letter that Democrat John Conyers, chairman of the task force, and Republican Steve Chabot, wrote to Attorney General Michael Mukasey, dated Dec. 11, in which they’re conveying their dismay over reports the Justice Department might be trying to rush through the merger and that “Assistant Attorney General for Antitrust Thomas O. Barnett may intend to grant the merger over the objections of department staff.”
Despite analysts yesterday saying the decision ultimately rests with Justice Department officials, stocks of the two companies plummeted as it was unclear what this development means, and investors’ confidence in the merger was shaken. Even if representatives hold no sway over the decision, the letter and objections voiced may slow the process.
Today, however, both satellite companies’ stocks are rebounding. Sirius shares are up 3.95%, or $0.13, to $3.42 and XM shares are up 7.12% or $0.94, to $14.15 in early morning trading.
What’s different this day? Perhaps the market has finally realized what analysts had been saying yesterday, that the proposed $5 billion purchase should not be affected by congressional representatives. Stifel, Nicolaus & Co. analyst Blair Levin added his voice to Frederick Moran of Stanford Group and David Bank of RBC Capital Markets, saying he believes the DOJ will “give its blessing,” clearing the way to the Federal Communications Commission. Like many other analysts, Levin also favors Sirius over XM.
Any investor who can stomach these two stocks’ roller coaster of a ride deserves to be rewarded should the merger finally be approved. For now, Sirius and XM are not for the faint of heart, not even close.
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