Friday, January 12, 2007

Stifel Nicolaus Analyst Says XM (XMSR) Has Merger on Their Mind

In a note to clients yesterday afternoon, Stifel Nicolaus analysts Kit Spring commented on XM Satellite Radio (Nasdaq: XMSR) after meeting with the CEO, two IR officers and several marketing managers. The firm said they believe XM is "indeed contemplating a merger w/ Sirius (Nasdaq: SIRI), perhaps due to widespread speculation that, given the synergies (we estimate a present value of $7B), it makes too much sense for Sirius not to try it."

Spring also said, "We believe a 50/50 enterprise value split or perhaps a slight premium to XM shareholders may be warranted in a merger scenario." He said the company's main reservation would be the potential disruption in the retail marketplace if consumers perceive XM as a company that is about to be taken over.

The firm maintains its Buy rating and $18 price target on XM.

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1 Comments:

Blogger Mike said...

LON,

Its time to head back to college and pay attention in your finance classes. The merger everyone is talking about is NOT possible.

First, balance sheets combine in a merger, i.e. debt. The combined company will have OVER 2 billion dollars in debt that far exceeds assets.

Second, Market Cap for Sirius exceeds XM by 25%, thing XM shareholder would be willing to pay Sirius shareholder a 25% premium, and acquire a billion dollars of debt?

Lastly, the FCC does not like monopolies (XM and Sirius are the only two companies in the Sat. Radio market) and therefore will NOT approve the merger.

So, all I can tell you is to keep looking in your crystal ball, or keep your fingers crossed (Use whatever method has worked best for you in the past) and watch your stock price fall.....

2:13 PM  

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