Barrons: Probablility Of Merger About 60%

Satellite Radio: Probability Of Merger About 60%
Posted on Apr 4th, 2007 with stocks: SIRI, XMSR

Eric Savitz (Barron's) submits: Clearly, the stock market has lost all enthusiasm for the proposed merger of XM Satellite Radio (XMSR) and Sirius Satellite Radio (SIRI). Not only have the stocks given up their initial merger premium, they are both now substantially below where they were trading on the day before the deal was announced.
XM shares are down 15% year-to-date; Sirius is off 13%.
Kit Spring, an analyst at Stifel Nicloaus, thinks the gloom is overdone. He put the probability of completion of the deal at 55%-60%; the key issue may be how the DOJ views competition from terrestrial radio, iPods and other music sources.
In any case, Spring contends the stock offers “excellent risk/reward,” whether or not the deal gets done. He sees several potential catalysts for the stocks:
The merger could be approved by the DOJ in late summer.
Retail comparisons get materially easier by the second quarter.
A large automaker could commit to making a satellite radio standard equipment.
Spring prefers Sirius on a stand-alone basis, but thinks both stocks are Buys. He keeps his price targets of $18 for XM and $5 for Sirius.
On February 16, the last trading day before the proposed merger was announced, XM closed at $13.98, and Sirius at $3.70. On February 20, the stocks closed at $15.41 and $3.92. Since then, it’s been all down hill. Today, XM is up 11 cents at $12.25; Sirius is up 3 cents at $3.12....read more: here

4/04/2007 09:23:00 PM

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