Friday, April 13, 2007

Bear Stearns Note

April 13, 2007

Peck noted the following after the DOJ second request and the Imus situation:

Report excerpts:

DOJ Second Request as Expected; Imus in Play?

Bear Stearns - 13 April 2007

· Second Request, as Expected.

XM and Sirius disclosed that they had received the "Second Request" from the Department of Justice. While this request for additional information was expected, the DOJ/FTC exercise significant restraint in issuing second requests. Between 1998 and 2005, according to the "Announcement of Federal Trade Commission Chairman Deborah Platt Majoras On Reforms to the Merger Review Process" dated February 16, 2006, the agencies issued second requests at an annual rate of between 2% and 4.1% of the total number of reportable transactions. From 1998 to 2005, the annual percentage of second request investigations by the FTC that resulted in some type of enforcement action (that includes transactions that resulted in consent decree or restructuring as well as a very small percentage that were challenged) ranged from 44% to 78%.
· Imus on Satellite Radio?

Business Week reported that CBS fired Don Imus after some of his recent comments raised a furor. Time Magazine once named Imus, who was aired on 61 radio stations, as one of the 25 Most Influential People in America, and he was a member of the National Broadcaster Hall of Fame. We think satellite radio is one of the options that would be available to Imus.

· Compensation May be Limited.

We think that the compensation levels for Imus may be significantly smaller than Stern's. The Business Week report stated that Imus contributed about $15 million in annual revenues to CBS. Howard Stern, on the other hand, accounted for an estimated $95 million in annual revenues and about $50 million in EBITDA. While Stern was paid the equivalent of 5x Revenue contribution for the 5-year contract, we believe he got a premium because (i) he could "make or break" the business model, and (ii) the economic/competitive environment was different then.

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4/13/2007 10:10:00 AM

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