Monday, November 27, 2006

Stifel Nicolaus Sees 75% Probability of SIRI/XMSR Merger ATTEMPT in Next 18 Months

Stifel Nicolaus analyst Kit Spring commented on speculation of a satellite radio merger between XM Satellite Radio Holdings (Nasdaq: XMSR) and Sirius Satellite Radio (Nasdaq: SIRI).

Spring said, "Based on History & Risk/Reward We believe the probability of a SIRI/XMSR merger ATTEMPT within the next 18 months (or potentially sooner) is 75%. Our conviction is based mainly on Mel Karmazin's track record and a compelling risk / reward trade off. We have dug through the 10ks and rediscovered that Karmazin-led companies conducted over 20 major M&A transactions, totaling nearly $80B."

Commenting on regulatory approval of such a deal, Spring said, "We believe the probability of an FCC/DOJ merger APPROVAL is 55-60%, with market definition as the key variable."

The firm reiterated their Buy rating on both SIRI and XMSR and raised their price target on XMSR from $16 to $18, with $2 of merger option value.

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