Bear Stearns analyst Robert Peck issued a client note this morning stating that growth of Sirius remains strong, and they still expect the merger to be approved by year-end.

Sirius Satellite Radio Inc. (SIRI) stock dropped roughly 9% yesterday amid concerns that the DOJ process would be extended. But its Bear Stearns' view that the merger remains on-track and will close by year-end. Peck reiterated his Outperform rating, adding "Sirius could be worth about $5.50/share at YE'08."

Peck was also impressed with Sirius' results announced yesterday, with the company having had beat out many of Bear Stearns' estimates (sans total revenue which was impacted by higher than expected OEM gross adds).

Sirius' stock is up 3.65% this morning,

While the subscriber and revenue growth of Sirius Satellite Radio Inc. looks pretty darn impressive, some analysts aren't quite swooning over the numbers, particularly none other than Bank of America's Jonathan Jacoby.

In a client note issued this morning, Jacoby warns investors "don't be fooled."

His reason? SAC and Cash EBITDA were worse than expected, despite higher net subscriber additions and a lower churn rate. Jacoby adds that the higher ramp up of OEM subscriber additions will catch up on the churn rate over time.

Jacoby points out that OEM additions for the quarter are understating churn, as those many automotive subscribers carry an estimated 6-month contract period. So by default, no churn can occur.

If you thought Citigroup putting the chances of the Sirius-XM merger at 69% was being optimistic, wait till you see what Tom Watts of Cowen & Company wrote in a recent note issued to clients.

Watts finds that there's a “70%-plus chance” that the merger of Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. wins government approval.

The Cowen & Company analyst says the Department of Justice decision should come “relatively soon,” with both companies in full compliance with the DoJ’s information requests. He says a ruling from the FCC should follow soon after. About a month ago, Watts said that approval of the deal could come as early as October.

Watts has Outperform ratings on both stocks, “even without M&A potential.” He thinks both companies can beat the market on free cash flow potential alone. Watts also feels that XM and Sirius set conservative subscriber growth estimates for 2007, “setting the stage for out-performance in the second half.”

[Barrons]

Right on cue, Sirius Satellite Radio has scheduled its third quarter 2007 earnings call for Tuesday, October 30th at 8am ET.

You can listen to a live webcast of the call online, or by tuning to Sirius channel 126.

In a follow up to the note issued earlier this week, Citigroup analyst Eileen Furukawa suggests in a report issued this morning that there is a 69% chance that the XM-Sirius merger gets approved by either the FCC and/or the DOJ by December 5th.

Furukawa estimates the current Sirius Satellite Radio Inc. stock price reflects a 41% chance of approval, "which is too bearish" while the XM Satellite Radio Holdings Inc. price reflects an even lower 29% chance of approval.

"Based on our view of a 69% probability that the deal is approved around December 5, and the associated stock moves based on the ruling, we conclude that XMSR calls are cheap, " write the Citigroup analyst.

While the analyst maintains a "Buy" position on both SIRI and XMSR, Furukawa feels that buying XMSR January '08 calls can be an attractive alternative strategy for investors looking to gain exposure to the XMSR/SIRI M&A event.

If the deal is rejected, Furukawa anticipates that XMSR will trade down 26% while SIRI will trade down 25% from the intraday price used.

"However, if the deal is accepted, to which we attribute a 69% probability, then we sense that both stocks will move higher in response," adding that the the speed of the move depends on how much investors believe the speed and magnitude of synergies can be achieved.

Citigroup analyst Eileen Furukawa issued a highly bullish report this morning, who feels that SIRI and XMSR stocks are currently undervalued and that the pending XM-Sirius merger has a “high 60%” probability of success.

Furukawa says that a “detailed, item line analysis” of a merger of XM Satellite Radio Holdings Inc. with Sirius Satellite Radio Inc., found that the satellite radio marriage could create “present value” cost savings of $7 billion - with 10%-20% savings across customer service, programming, R&D, sales and marketing and other areas.

In addition, although she does not specifically factor this into her model, Furukawa says that the combination “could drive higher ad revenues given larger combined reach.” Furukawa's model also doesn't include savings on capital expenditure from shifting to a single system, which she feels could be worth $750 million long term.

Furukawa says that XM's stock price at last night’s close reflects a 24% chance that the pending merger of the two companies succeed, a view which she says is too bearish. The Citigroup analyst thinks the deal has a “high 60%” probability of success.

She gives the stock a “probability weighted” target price to $19.50, up from her previous target of $15, but she also says that the company could be worth $23 a share if all of the synergies she sees are realized.

Both XMSR and SIRI were up significantly this morning on the news.

[via Barrons]
Thanks Gary!

Sirius and XM shareholders are slated to cast their vote on the proposed merger on November 13th, according to a recent SEC filing.

Structured to give existing XM and Sirius shareholders roughly 50/50 ownership, the deal sets up XM shareholders to receive 4.6 SIRI shares for each XMSR share. Based on Sirius' closing price as of yesterday, the deal values XMSR at $15.92 a share.

A vote in favor of the merger is required only from XM shareholders, though Sirius investors must approve issuance of shares and other matters related to the deal.

Sirius investors who held shares as of Tuesday and XM shareholders as of Monday are eligible to vote on the deal.

Set to hold their meeting on the same day, Sirius' meeting is scheduled for 9am ET, and XM's meeting is scheduled for 3pm ET. Sirius' stockholder meeting will be held in The Auditorium at The Equitable Center, 787 Seventh Avenue, New York, New York 10019 and XM's shareholder meeting will be held at The Renaissance Mayflower Hotel, 1127 Connecticut Avenue, NW, Washington, DC 20036.

The end is near...

[SEC Filing via CNN Money]

Mel Karmazin said the Department of Justice is seeking more details on the proposed merger between Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc.

"They continue to ask for information," Karmazin said in an interview following a taping of "The Charlie Rose Show" on Tuesday.

"We still think the timetable will be in the fourth quarter," Karmazin added, though didn't specify what type of data is being sought.

The head of the DOJ's antitrust division, Thomas Barnett, told a congressional hearing last week he needed to know more before making a decision on the proposed combination of the only two satellite companies. He declined to give a timeframe, though said that DOJ wants to move "as quickly as possible."

On September 5th, Sirius and XM they had complied with DOJ requests for more information, causing analysts to predict that a decision on the merger could come as soon as October.

[New York Post]