2009

www.siriusxm.com

MONAWAR ZEESHAN AAMIR

FINANCE 2

[MERGERThe Biggest
& ACQUISTION]
Merger
An Analysis of the Merger between Sirius and XM into SIRIUS XM RADIO Inc

In
Terrestrial Radio
Industry
No CONTENT PAGES

1. COMPANY INFORMATION (SIRIUS RADIO Inc.) 3

 List of services and Channels 4
2. COMPANY INFORMATION (XM RADIO Inc.) 6
7
 List of services and Channels

3. SIRIUS AND XM GROTH METER (Image) 8

4. COMPANY INFORMATION (SIRIUS XM RADIO Inc.) 9
5. PRE-MERGER INFORMATION 10
 Terms of the merger 11
 Federal Communication Commission 12

 Predicted outcome 13

6. DURING MERGER INFORMATION 14

 Satellite radio is the underdog 14
 Times have changed 15

 Satellite is growing but can grow faster 15

16
 More choice for the consumer
17
 Prices will be kept in check
7. POST MERGER INFORMTION 18
8. INCOME STATEMENT ENDING DECEMBER 2008 20
9. INCOME STATEMENT ENDING MARCH 2009(Q1) 21
10. SIRIUS XM RADIO Inc. BENEFICIAL OWNER 23
11. OBJECTIVE BEHIND MERGER 24
12. DUE DILIGENCE 25
 “AQUIRER COMPANY PROFILE SIRIUS SATELLITE RADIO”

Sirius Satellite Radio is a satellite radio (SDARS) service operating in

the United States and Canada, owned by Sirius XM Radio.

Sirius Satellite Radio

Headquartered in
New York City, with
Type Division of Sirius XM Radio smaller studios in

Founded May 17, 1990 (as Satellite CD Radio, Inc.)

Los Angeles and
Memphis, Sirius
Headquarters New York City, New York, United States
was officially

Industry Broadcasting - Radio launched on July 1,

2002 and currently
Products Satellite radio
provides 69 streams
Revenue US$1.6 billion (2008) (channels) of music
and 65 streams of
Net income US$-5.3 billion (2008)
sports, news and
Employees 900 (2007) entertainment to
listeners. Music
Parent Sirius XM Radio
streams on Sirius
Website www.sirius.com carry a wide variety
of genres,
broadcasting 24 hours daily, commercial-free, and uncensored. A
subset of Sirius music channels is included as part of the Dish
Network satellite television service. Sirius channels are identified by
Arbitron with the label "SR" (e.g. "SR120", "SR9", and “SR17").

List of service provided by Sirius:

1. Programming content

2. Sports channel

3. Music for business

CHANNELS

4. Iceberg Radio

5. CBC Radio 3

6. Rock Velour

7. Sports extra

8. Hardcore Sports Radio

9. Sports express

10. ESPN All Access

11. Radio Korea

12. NPR Talk

13. RCI +

14. CBC Radio One

15. The Weather Network Satellite Radio Service

16. Sporting News Radio

17. Internet Radio

18. iPhone and iPod Touch application

Sirius is been very much updated with technology to send and receive
signals throughout Canada and United States of America.

AQUIREE COMPANY XM SATELLITE RADIO

XM Satellite Radio (XM) is one of two satellite radio (SDARS) services

in the United States and Canada, operated by Sirius XM Radio.

XM Satellite Radio Holdings, Inc.

 Type Subsidiary of Sirius XM Radio

1992 (as American Mobile Radio Corporation)

Founded
2001 (as XM Satellite Radio)

Headquarters Washington, D.C., USA

Nate Davis, President and CEO

Joseph P. Zarella, CSO, Business Operations, Listener Care

Key people
& Information Technology

Jon Zellner, Executive Vice President, Programming

Industry Broadcasting - Radio

Products Satellite Radio

Revenue US$1.14 Billion (2008) From Yahoo Finance

Net income US$-682.38 Million (2006)

Employees 860 (2007)

Parent Sirius XM Radio

Website XMradio.com

It provides pay-for-service radio, analogous to cable television. Its

service includes 73 different music channels, 39 news, sports, talk and
entertainment channels, 21 regional traffic and weather channels and
23 play-by-play sports channels. XM channels are identified by
Arbitron with the label "XM" (e.g. "XM32").

List of services provided by XM radio.

1. Satellite radio

2. XM Radio Online

3. Weather and traffic

4. Commercial adoption and partnerships

CHANNELS
5. The Virus

6. KISS

7. Mix

8. Nashville!

9. The Pink Channel

10. Rock@Random

11. Fox Sports Radio

12. MLB Play-by-Play

13. Extreme Talk

14. America's Talk

15. Talk Radio

16. ATN-Asian Radio

17. ReachMD

18. XM Scoreboard

19. ESPN Xtra

20. Calendrier Sportif

21. XM Deportivo

22. Laugh Attack

23. Canada 360

24. Quoi de Neuf

SIRIUS AND XM SATELLITE RADIO GROWTH METER

THE FORMATION OF A NEW COMPANY Sirius XM Radio, Inc

Sirius XM Radio, Inc. (NASDAQ: SIRI) is the holding company for two

satellite radio services (SDARS) operating in the United States and
Canada, Sirius Satellite Radio and XM Satellite Radio. The two parent
companies completed their merger (technically the acquisition of XM by
Sirius) on July 29, 2008.
 Sirius XM Radio, Inc.

Type Public (NASDAQ: SIRI)

XM - 1992 (as American Mobile Radio Corporation)

Sirius - May 17, 1990 (formation of Sirius as Satellite CD
Founded
Radio, Inc.)
Sirius XM - July 29, 2008 (acquisition of XM by Sirius)

Headquarters New York City, New York, United States

Area served North America

Gary Parsons, Chairman

Mel Karmazin, CEO

Scott Greenstein, President, Entertainment/Sports
Key people James Meyer, President, Operations & Sales
Dara Altman, Executive VP/Chief Administrative Officer
David Frear, Executive VP/CFO

Patrick Donnelly, EVP/General Counsel

Industry Broadcasting, radio

Products Satellite radio

Employees 973 (2008)

Divisions Sirius Satellite Radio, XM Satellite Radio

 Website www.siriusxm.com

PRE-MERGER HISTORY:

The deal of merger was announced on 19 February 2007 as a result of

which the two separate satellite radio service provider will form a single
satellite radio network in the United States which will bring a total of
18.5 million subscribers based on their current number of subscribers.
But this deal was giving a halt after some critical issues were raised by
the competitors and law that they will become a single entity and might
stop competition. Some of them were;

1. Terms of the Merger:

Although the deal is termed as a merger but according to some it was

considered to be an acquisition of XM by SIRIUS. For one, XM
shareholders will receive a certain amount of SIRIUS stock in exchange
for their XM shares. Second, XM shareholders will receive a 22%
premium on that share transaction, resembling the price of a control
premium in an acquisition.  Third, SIRIUS’s Chief Executive Officer,
Mel Karmazin, will lead the combined entity as CEO, but XM’s CEO,
Hugh Panero, “will not have an executive role” in the new entity.

The rationale for the terminology “merger of equals” may have to do

with the current FCC satellite radio licensing rule.  In 1997, the FCC
granted only two licenses and, as a measure to ensure ongoing
competition, “stipulated that one of the holders would ‘not be permitted
to acquire control of the other. Thus, the FCC stipulation suggests that
the rule would only apply if either SIRIUS acquired XM, or vice-versa,
but not if the two companies merged “equally .”

2. FCC Reaction

In reaction to the SIRIUS-XM merger announcement, FCC Chairman

Kevin J. Martin responded that to pass regulatory scrutiny the
companies “would need to demonstrate that consumers would clearly
be better off with both more choice and affordable prices. Whether this
is a merger of equals or a disguised acquisition, the FCC will consider
these factors in its regulatory review.

A.  More Choice

There were two issues relating to the FCC reaction of more choice. The
first is to consider whether the combined entity will offer greater
programming choices to consumers than two separate entities.  The
second is to consider whether the combined entity will offer more
choice to consumers in general, taking into account other radio media
sources.

B.  Affordable Prices

The other issue which FCC announced was that after merging and
becoming a single radio satellite company in United States, whether
they will provide facility at an affordable price or charge high due to the
fact they are the only ones who are the best in radio satellite
technology.
3. Predicted Outcome

The biggest concern for the FCC was whether this merger is a merger
of equals. FCC concern was that whether the merger of equals is really
what it purports to be or whether the combination is a linguistic
loophole to the rule against acquiring a competitors broadcasting
license.

So in the pre-merger the biggest obstacle was created by the United

States Department of Justice and Federal Communication Commission
which was that the merger might not be actually a merger but an
acquisition which will lead to monopoly power of Sirius in terrestrial
radio.

During merger

After duly investigation of the merger information Sirius got the

regulatory approval from the U.S Department of Justice on March 24
2008 and by July 25 2008 the Federal Communication Commission
also gave its approval for the go for the merger stating that the merger
could actually benefit consumers, who might see lower prices as the
result of more efficient operations, broader programming options, and
faster rollouts of new technology.
Some reasons which were verified to get the merger done were;

1. Satellite Radio is the underdog;

Both companies showed that this merger won't create an evil
monopoly, so they positioning the satellite radio industry as a very tiny
part of a global competitive marketplace. It's not "radio" at all, but
rather "audio" - so anything that competes for the consumer's ear
share is in essence competition.

2. Times have changed:

It’s not 1990’s.The audio marketplace has changed and this merger is
needed in order to stay with the times. And we're in such a quickly
developing technology boom right now that even un-established threats
(e.g., Wi-MAX) are a potential threat. This actually is a play towards
point #1, because they can claim that the FCC couldn't have predicted
the future and that sticking to the old rules is crippling in nature.

3. Satellite Radio is growing, but can grow faster:

Regardless of the competitive threats, the satellite radio medium has
grown faster in the past 5 years than any other consumer technology
(with exception to the iPod). This is a double-edged sword, because it
could work against the "underdog" positioning, but it clearly shows
that there's a public interest in this medium.

4. More choice for the consumer:

If you happen to be a Howard Stern fan and a baseball fan, you
currently have to buy two receivers and pay two subscriptions. More
importantly you don't have this choice as an integrated OEM solution
when you buy a new car. A merged company allows you, the consumer,
to get access to all the content your heart desires. Throw in the A La
Carte option and it becomes all about choice.

5. Prices will be kept in check:

After duly approval from the DOJ and FCC, Sirius agreed to pay $19.7
million in fines for violating FCC rules for locating signal towers in un-
approved areas and making radios that exceeded power limits, cap
prices for three years at the current $12.95 per month subscription
rate, offer a la carte programming with tiered pricing and create new
radios that can receive both Sirius and XM satellite signals , the deal
which had no issue from the shareholders of both the companies
finally got merged into forming SIRIUSXM Radio Inc. The deal was
done for 5 Billion with the breakdown in each share of XM stock was
replaced with 4.6 shares of Sirius. Each company's stockholders
initially retain approximately 50% of the joined company. Sirius CEO
Mel Karmazin is the CEO of the new company, and XM chairman Gary
Parsons is the chairman of the company.

Post merger

The major post merger objective of Sirius after merging was cost
savings, variety and new development in the terrestrial radio service.

 Cost

Because both companies will operate as one, this may reduce the cost
of licensing the broadcast material. It will also almost certainly reduce
the staff required to run the company. Also, programming can be
spread out among the companies' combined satellite constellations.

 Variety

If all the non duplicate channels are kept, this will result in more
programming being made available to subscribers of both services.
 New development

With only one company to develop products for, the new company can
afford to spend more money to develop new products. So far, services
have been developed which were not even conceived of when satellite
radio was launched. XM and Sirius now carry satellite weather and
traffic, and Sirius launched television programming in 2007. Likewise,
it is expected that new technologies and products will continue to be
developed and integrated into the combined infrastructure of XM and
Sirius radio.

Other than the above objectives the company announced few more
objectives that it will achieve in near future. These were

 $400 million in "total net synergies" in 2009,

 Adjusted EBITDA of $300 million in 2009,
 Joint company becomes cash flow positive in 2009
An Analysis of the Income statement ending December 2008

The subscription compare to 2007 has an increase of 80.60%.

The revenue after the merger has increased by 80.46% for the
company.

Income Statement of Sirius XM ending Quarterly basis

An analysis of the Income Statement of Sirius XM Radio Inc ending quarterly on
March2009

Compare to quarter ending December 2008 there has been a decrease

in revenue by 5.99% but there has been an increase gross profit
margin by 2.9% as well as there is an decrease in their losses 79.50%
(from 245.8 to 50.4) so it can be concluded that the company is doing
pretty well after merger and there is a scope for the company to make
positive profit in near future.

Post merger the newly company formed faced with debt of billions
which was helped by Liberty Media Corporation as an administrative
agent and collateral agent. This will help Sirius XM Radio In. to prevent
possible takeover by Charlie Ergen’s Dish Network Corporation and
from filling Chapter 11 bankruptcy.
Sirius XM Radio Inc. Beneficial owner:
 Objectives of Merger between Sirius and XM:

1. The first objective which I see on the merger of Sirius and XM is

acquire of market share and brand name

Company 2002 2003 2004 2005

XM (market share revenue) 96.1% 87.7% 78.5% 69.7%
Sirius (market share revenue) 3.8% 12.3% 21.5% 30.3%
HHI (revenue) 9,262 7843 6627 5779
XM (subscribers) 92.1% 83.9% 73.6% 64.1%
Sirius (subscribers) 7.9% 16.1% 26.1% 35.9%
HHI (subscribers) 8,538 7298 6138 5400

As it can be seen that Sirius is on a growing stage with lower market

share as well as XM has a larger market share but is losing on its
share so merger of XM by Sirius help in combining the share to give a
stable stature.

2.Squeeze out competition by acquiring your competitor: As it can

be seen that XM radio had better market share and revenue
generation, so Sirius was in growing stage which saw an opportunity to
increase share and value in the market and cut down competition in
the market.
3. Create a dominant position by sheer size, which helps in
improving profit margin when overhead can be lowered: By the
joining hands with XM, Sirius will become the 2 nd largest market share
radio company in U.S.

4. Growth by acquiring additional revenue, profit and asset base:

The Sirius was running on losses even after being in growing stage so it
saw an opportunity to maximize its revenue and minimizes the
operating loss which the company is facing.

Due Diligence and Documentation between Sirius and XM

1. Strategic fit: The first fit which can be seen between Sirius and XM
is strategic fit. Both XM and Sirius have large number of channels to
give it to customers.

2. Marketing fit: As both companies are in the terrestrial radio service

provider, they both have the same marketing channel to promote its
products and services so a marketing fit can be seen in their merger.

3. Operating fit: In terrestrial radio service provider the employee

requirement is same so there an operating fit can be seen between
Sirius and XM.

4. Management fit: Sirius and XM both had an expertise

management team, by joining hands they both together brought the
management fit.
5. Financial fit: Both the companies were gaining revenue year by
year but due to high operating expense their gross profit was turning
into operating losses so they both joined hands to minimize their losses
and achieve profit.

6. Market: The audio market is been the biggest competitor for the
terrestrial radio market but as both companies had been gaining
market from the automaker companies so there is a scope for major
market gain in future.

7. Customer: There has been an increase in the subscription in the

terrestrial radio and with later new services on the go by the companies
there will be an increase in the customer for terrestrial radio.

8. Competition: The biggest competition for the terrestrial radio has

been the Clear Channel Communication (CCU) and CBS as well as
from an indirect competition from IPod so after merging there is a
scope of less competition for the company Sirius XM Inc.