Filed under: Deals, XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI)
The Justice Department has approved Sirius Satellite Radio Inc. (NASDAQ: SIRI)’s $5 million buyout of XM Satellite Radio Holdings Inc. (NASDAQ: XMSR), on the grounds that the deal isn’t prone to hurt consumers or competition.
In a press release, the Justice Department stated that “The likely evolution of technology played an important role in the Division’s assessment of competitive effects in the longer term because, for example, consumers are prone to have access to new alternatives, including mobile broadband World wide web devices, by the time the current long-term contracts between the celebrations and vehicle manufacturers expire.”
And that’s exactly why I wouldn’t touch either of these companies. The Justice Department is essentially saying that emerging technology will make satellite radio a small enough part of the industry that consumers won’t be harmed by the 2 biggest players merging. Do you really want to own a money-losing entity that will be facing increased competition over the next few years because of new alternatives for consumers?
The Justice Department’s approval of the merger is a strong indicator that the merger won’t be enough of a game changer to effect competition — which means it also probably isn’t a massive win for the companies either.
The Department added that “It wasn’t possible to estimate the magnitude of the efficiencies with precision due to the lack of evidentiary support provided by XM and Sirius…”
In other words, the Department found that many of the claims of synergy and efficiency the companies used to pitch the merger to Wall Street were lacking in “evidentiary support.” It sounds to me like this could be just another non value-creating merger to add to the pantheon of deals that have over-promised and under-delivered.
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