Wall Street Journal: Arbitrageurs Are Getting More Comfortable That A Deal Could Go Through
March 12, 2007, 1:36 pm
Warming Up to an XM-Sirius Deal Posted by Dana Cimilluca
The winds of fortune are shifting in favor of Sirius Satellite Radio CEO Mel Karmazin, or at least that is Deal Journal’s take. We sense that the odds his bid for rival XM Satellite Radio Holdings will get approved by federal regulators aren’t as long as they once looked.
Exhibit A is Federal Communications Commission Chairman Kevin Martin’s
comments in a New York Times interview last week, when he said the satellite companies need to be clearer about what will happen with prices if they are allowed to merge. While it seemed on the surface that he was chastising Karmazin for being sneaky in his public comments, there’s another way to see Martin here: as someone willing to listen to arguments in favor of the $13 billion deal.
He didn’t use the interview — which we doubt was an off-the-cuff, unrehearsed encounter — to reiterate comments he made when the deal was announced, about it facing a “high hurdle,” or anything else indicating he’s made up his mind. Instead, he essentially critiqued the way the companies are making their argument, which could actually help them strengthen it. And keep in mind that Martin’s FCC approved the AT&T-BellSouth combination last year, the type of union that a predecessor famously called “unthinkable” because of the harmful effects it would have on consumers.
Indeed, in this week’s New Yorker magazine, James Surowiecki makes a forceful argument that radio listeners would
benefit from the deal because it would inject some desperately needed diversity into the bland offerings the conventional radio broadcasters have smothered us with.
Then there’s the idea that with the billions of dollars in red ink the companies have bled, if they can’t merge, satellite radio could be an endangered species, and that surely wouldn’t be good for customer choice.
The so-called spread between Sirius’s offer and XM’s share price is wide, as investors fret that accusations of a monopoly in satellite radio will put off regulators. But it’s getting narrower, down now to 15% from 19% in the three weeks since the deal was announced, meaning arbitrageurs are getting more comfortable that a deal could go through...read more:
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