XM, Sirius Agree to Merge

The two satellite radio operators say they've signed an agreement on a $13 billion 'merger of equals.'
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Updated from 3:39 p.m. EST

After months of speculation that

XM

(XMSR)

and

Sirius

(SIRI) - Get Report

would merge, the two satellite radio operators said Monday that they plan to tie the knot.

In

a press release

, both sides billed the union as a "merger of equals," with XM and Sirius shareholders each owning about 50% of the combined company. They also said the combined company would have an enterprise value of $13 billion, including $1.6 billion in debt.

New York-based Sirius will issue stock to purchase the outstanding shares of its former rival, paying a fixed exchange ratio of 4.6 shares for each share of Washington, D.C.-based XM.

U.S. stock markets were closed Monday in observance of the Presidents Day holiday. XM shares gained $1.00 Friday to close at $13.98, while Sirius stock added a dime to close at $3.70.

Subscriber growth for the pay-radio companies has cooled, and they've come under pressure to cut costs. Analysts have said a merger would be an effective way of doing just that.

Mel Karmazin, currently CEO of Sirius, will become CEO of the combined company, and Gary Parsons, currently chairman of XM, will become chairman.

The two companies said they expect to complete the deal by the end of this year, pending regulatory approval. But getting the nod from the government could present a significant hurdle. On Jan. 17, the head of the Federal Communications Commission said existing rules wouldn¿t allow a single company to own two satellite-radio operators, although a day later

he reportedly said those rules could be rewritten.

Perhaps partly in an appeal to regulators, XM's top officials stressed the possible benefits the deal could have for consumers.

"The combined company will be better positioned to compete effectively with the continually expanding array of entertainment alternatives that consumers have embraced since the Federal Communications Commission first granted our satellite radio licenses a decade ago," said Gary Parsons, the company's chairman, and Hugh Panero, its CEO, in the press release.

The companies plan to hold a joint conference call and Webcast on Tuesday at 8:30 a.m. EST.