US rivals XM and Sirius agree to combine

US firms XM Satellite Radio Holdings and Sirius Satellite Radio, rivals in the fledgling satellite radio industry, have agreed to combine in a deal that investors hope will result in lower costs, assuming it overcomes significant regulatory hurdles, an Associated Press report said.

The Associated Press report said the companies billed the deal as a merger of equals, with shareholders of both companies owning approximately 50% of the combined entity. However, Sirius will be giving $4.57 billion of its stock to XM shareholders, a substantial premium to the value of their shares.

Sirius' CEO Mel Karmazin will lead the combined company, and XM's CEO Hugh Panero will stay on only until the deal is closed. XM chairman Gary Parsons will remain in that role, the report added.

The deal faces substantial obstacles in Washington, including a Federal Communications Commission provision that specifically forbids the two companies to combine, the report added.

Analysts have noted that the FCC could change the rule, but in a statement FCC chairman Kevin Martin said that the 'hurdle' would be 'high' to prove that the deal would be in the public interest.