U.S. Justice Department approves Sirius’s purchase of XM Satellite Radio
WASHINGTON: The U.S. Department of Justice 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 traditional radio broadcasters.
The buyout received shareholder approval in November. The companies said the merger would save hundreds of millions of dollars in operating costs.
David Joyce, an analyst at Miller Tabak, said the savings could be significant. “The net present value of synergies could be north of $3 billion,” he said.
The Justice Department said the combination of the companies would not hurt competition because the companies were not currently competing. 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 appeared to endorse the argument of Sirius and XM that their competitors encompassed many forms of audio entertainment, including “high-definition” radio, Internet-based radio stations and even music players 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 climbed $1.85, or 15.5 percent, to close at $13.79 in New York after the governments announcement, while Sirius shares rose 25 cents, or 8.6 percent, to close at $3.15.
The deal is also being examined by the Federal Communications Commission. April Horace, an analyst at Janco Partners, said FCC approval of the combination was probable.
“The takeaway here is that historically the FCC does not go against the DOJ,” Horace said, referring to the Department of Justice. “We obviously think the two agencies have been talking.”
