Canada's satellite radio companies have finally struck a deal on a long-awaited merger, more than two years after the industry consolidated in the United States.
Sirius Canada Inc. and XM Canada announced Wednesday that they have agreed to combine operations. The new entity will be a public company with the name of XM's current parent company, Canadian Satellite Radio Holdings Inc.
The combination of the two companies has been a question in the industry since their U.S. counterparts merged in the summer of 2008, when Sirius Satellite Radio Inc. bought rival XM Satellite Radio Holdings Inc. in a $5-billion (U.S.) deal. The Canadian companies rely on their U.S. counterpart, Sirius XM Inc., for much of their programming.
After the U.S. merger, the Canadian talks were held up in part by disputes about how much value each company would bring to the combined entity. Sirius Canada and XM Canada had questioned each other's subscriber numbers over the years.
The deal reached late Tuesday night and in the early hours of Wednesday, finally settled the dispute: Sirius Canada shareholders will be given a slightly larger stake in the new company, with 58 per cent of the equity.
"It was the next logical step in the evolution of satellite radio," John Bitove, chairman of Canadian Satellite Radio, told analysts on a conference call on Wednesday.
The all-stock deal values the combined company at $520-million, including $130-million in long-term debt. Together, its subscribers will number more than 1.7 million.
Mr. Bitove will be chairman of the new company. Current Sirius Canada chief executive officer Mark Redmond will be CEO.
As for subscribers, "there'll be no change for them," Mr. Redmond said in an interview. Even after the merger in the United States, Sirius and XM remain essentially separate services, using different satellites. XM subscribers who want access to content exclusive to Sirius are given an option to spend $4.99 (U.S.) for a "best-of" package to augment their service, and the same goes for Sirius customers.
Mr. Redmond said a similar offer is most likely in Canada, for XM customers who want to hear Howard Stern, for example, or Sirius customers who want NHL hockey games.
"I think you'll see, over time, a migration to a single platform, but even when that happens ... there's still 20 million legacy radios out there that are on two different systems," he said.
Sirius Canada's stake in the new company will be divided among its owners CBC-Radio Canada and Slaight Communications, and U.S. company Sirius XM Radio Inc., which currently has a stake in both Canadian companies.
XM Canada's part of the deal will see Mr. Bitove (currently the controlling shareholder of XM Canada parent company Canadian Satellite Radio) given a 22.7-per-cent stake in the new company. Other XM shareholders, including the shares trading on the Toronto Stock exchange and a minority stake held by General Motors, will comprise a further 10.2 per cent of the new company.
The deal requires approval from shareholders and the Canadian Radio-television and Telecommunications Commission, as well as the Competition Bureau. The companies expect it to close in the first few months of 2011.
Ownership: Privately held. A partnership between the CBC, Slaight Communications, and a division of Sirius XM Radio Inc. in the U.S.
Subscribers: More than one million.
Key properties: Howard Stern; CBC radio and Hockey Night in Canada radio; NFL; CFL; Barclays Premier League soccer; NASCAR; F1 racing; Martha Stewart Living radio.
Ownership: Public company. Chairman John Bitove controls CSR Investments, which is the controlling shareholder in XM Canada's parent company; U.S. company Sirius XM Radio Inc. holds a stake in both XM and Sirius in Canada.
Subscribers: 432,200 as of Aug. 31.
Key properties: Major League Baseball; NBA; NHL; English Premier League soccer; PGA Tour; Oprah & Friends radio.