Updated from 9:17 a.m. EDTSirius Satellite Radio and XM Satellite Radio have finally completed their merger, just days after the Federal Communications Commission voted to clear the deal. However, shares of Sirius continued their recent slide, lately down 20% to $1.50, after the company announced details of a $375 million common stock offering. The new company plans to change its corporate name to Sirius XM Radio and trade on the Nasdaq Global Select Market under the symbol SIRI. XM shareholders will receive 4.6 shares of Sirius common stock for each share of XM. "I am delighted to announce the completion of this exciting merger between Sirius and XM," said Mel Karmazin, the chief at Sirius who will also lead the combined company. "We have worked diligently to close this transaction and we look forward to integrating our best-in-class management teams and operations so we can begin delivering on our promise of more choices and lower prices for subscribers." In a separate release, Sirius said it will offer 183.6 million shares at a fixed price of $1.50 a share, with the remaining 78.7 million shares to be offered "from time to time after the fixed price offering at prevailing market or negotiated prices." The terms of the offering call for Sirius to lend the stock to affiliates of Morgan Stanley and UBS, and the shares will eventually be returned. While the "borrowed" stock will be considered issued and outstanding for corporate law purposes, Sirius believes that U.S. generally accepted accounting principles don't require the shares to be outstanding when per-share earnings or losses are calculated, because of the fact that they will be returned.
The common stock offering is being conducted concurrently with a private offering by XM of $550 million of senior notes, due in 2014, which will be exchangeable into common shares of Sirius. April Horace, an analyst with Janco Partners, said that shares of Sirius are dropping because no one expected the newly combined company to issue debt. "That wasn't expected or anticipated," she says. "Sirius' equity offering is a little confusing. The debt holders don't want to have the exposure of the exchangeable debt, so Sirius is issuing common stock shares to these debt holders so they are hedged."