Sunday, February 25, 2007

New York Times: More Merger Comments

February 25, 2007, Dealbook, The New York Times

When Unequals Try to Merge as Equals
By ANDREW ROSS SORKIN

HERE’S a tip about deal-making: When companies start talking about a “merger of equals,” someone is usually getting the better deal. It is especially true in the proposed merger of XM Satellite Radio and Sirius Satellite Radio.
It is being billed as a merger of equals, with each company getting exactly half of the new entity.
But here’s the unequal part: The stock market thinks that Sirius is worth almost $1 billion more than XM. To get the numbers to work, Sirius offered to pay a handsome 22 percent premium to shareholders of XM. (The premium is actually almost a whopping 30 percent if you account for the run-up in XM’s shares the Friday before the deal was announced, as word began to leak.)
So why did Mel Karmazin, the chief executive of Sirius, dress up the deal as if both companies were on the same footing?
I called Mr. Karmazin soon after the deal was announced to ask just that.
“If you give me a lie detector test,” he said, “I’ll tell you that I believe we’re worth more than them.”...read more: here