U.S. Justice Department approves Sirius’s purchase of XM Satellite Radio
WASHINGTON: The U.S. Justice Department approved Sirius Satellite Radios $5 billion buyout of its rival XM Satellite Radio on Monday, saying the deal was unlikely to hurt competition or consumers.
The deal was approved despite opposition from consumer groups and an intense lobbying campaign by the land-based radio industry.
The buyout received shareholder approval in November. The companies said the merger would save hundreds of millions of dollars in operating costs, which would benefit customers.
David Joyce, analyst at Miller Tabak, said the savings could be significant.
“The net present value of synergies could be north of $3 billon,” Joyce said.
The Justice Department said the combination of the companies would not hurt competition because the companies are not competing today. Customers must buy equipment that is exclusive to either XM or Sirius, and subscribers rarely switch providers.
“People just dont do that,” said Thomas Barnett, an assistant attorney general.
The government seemed to endorse the argument of the companies that they compete with other forms of audio entertainment, including “high-definition” radio, Internet-based radio stations and even devices like the iPod.
“The likely evolution of technology in the future, including the expected introduction in the next several years of mobile broadband Internet devices, made it even more unlikely that the transaction would harm consumers in the longer term,” the Justice Department said.
XM Satellite shares rose $1.97, or 16.5 percent, to $13.90 in afternoon trading after the governments announcement while Sirius shares rose 28 cents, or almost 10 percent, to $3.18.
The deal is also being examined by the Federal Communications Commission, also expected to approve.
April Horace, an analyst at Janco Partners, was bullish on approval.
“The takeaway here is that historically the FCC does not go against the DOJ,” Horace said, referring to the Justice Department. “We obviously think the two agencies have been talking and this is not necessarily a surprise to the FCC.”
