By Demian Russian
Things are coming together for the privately held Sirius Canada and the publicly traded XM Canada, held by Canadian Satellite Radio Holdings Inc. (TSE:XSR). After a joint announcement on November 24th, 2010 that the two separately operating Sirius XM Radio (NASDAQ:SIRI) affiliates planned to combine in an all-stock merger of equals, Canadian Satellite Radio Holdings (CSR) shareholders unanimously approved the merger at CSR’s annual and special shareholder meeting held on February 17th, 2011. Under the merger agreement terms, Sirius Canada shareholders will be issued treasury shares of CSR, which will equate to a 58% equity interest in CSR immediately following the closing of the transaction. The remaining ~37% economic interest will be held by Sirius XM Radio (NASDAQ:SIRI), as reiterated by Sirius XM’s CFO David Frear during the company’s Q4 2010 conference call on February 15th, 2011.
Then just last week, on February 23rd, 2011, The Competition Bureau of Canada, Canada’s equivalent of the U.S. Department of Justice, announced that it did not intend to challenge the merger proposal by submitting an application to the Canadian Competition Tribunal in regards to merger provisions outlined in the Competition Act. In forming its decision, The Competition Bureau said that they had conducted a thorough review of the merger proposal, gathering input from automobile manufacturers, retailers, competitors, as well as Sirius Canada and XM Canada. The Competition Bureau also consulted with the U.S. Department of Justice Antitrust Division, which conducted a thorough review of the U.S. Sirius XM merger in advance of its completion in 2008. The next step in the merger approval process will be the approval by the Canadian Radio-television and Telecommunications Commission (CRTC), the Canadian equivalent of the U.S. FCC. The CRTC announced that a hearing on the merger has now been scheduled for March 7th, 2011.
Coming on the heels of (the February 17th) CSR shareholder approval, (the Competition Bureau) announcement is another exciting step forward in the process towards the proposed merger. We look forward to the next step at the March CRTC hearing. We are pleased that the competition bureau recognizes that the combined company will create a stronger Canadian media company that not only provides a platform for future innovation within the audio entertainment industry but will offer a better opportunity for artists to reach new audiences.
– John Bitove, Executive Chairman of Canadian Satellite Radio Holdings Inc.
In The Competition Bureau of Canada’s position statements released at the time of its decision, the case for the merger proposal’s approval is laid out in detail. The Bureau outlines its views on how the merger would affect existing subscribers, new customers, the OEM channel, and the retail channel. The Bureau found that the merger proposal would have little impact on existing subscribers, as “the majority of Satellite Radio account deactivations are attributable to customers switching to terrestrial AM/FM radio or MP3 players.” The Bureau also pointed out that in order for an existing subscriber to switch services, they would need to incur the upfront cost of purchasing a new radio that would be compatible with the other service. The Bureau viewed this type of subscriber switching as historically rare. Read More