Satellite mogul Charles Ergen made an offer late last year to take control of Sirius XM Radio Inc. but was refused by the company, reports the Wall Street Journal citing people familiar with the matter.Ergen proposed injecting enough capital into Sirius XM Radio to avoid its debt obligations and bankruptcy - and while he was rebuffed at the time - Ergen has reiterated his interest in taking control of the company.
But what are his motivations?
According to a Wall Street Journal source, who is said to be familiar with Ergen's strategy, his motivations aren't to force the company into bankruptcy proceedings in order to acquire its assets more cheaply.
In fact, Ergen is said to believe that Satellite Radio is a compliment to his Satellite TV operations.
Charles Ergen is the co-founder and CEO of EchoStar Communications Corp., the former parent company of Dish Network.
WSJ suggests that Ergen's overture shows that he's been planning his run at Sirius XM for some time. EchoStar began accumulating the company's debt several months ago, according to people familiar with the situation.
Last week, EchoStar acquired $175 million in debt that matures on February 17th - a move that could determine the company's fate.
Sirius XM had been in negotiations with the hedge fund that held the notes to exchange them for more senior debt and equity. But before Sirius XM could reach a deal with the hedge fund, EchoStar stepped in and acquired the debt - giving Charles Ergen more leverage.
In discussions with investors last week, Karmazin said that unless he could raise $175 million, he would be faced with one of two options: having Sirius XM file for bankruptcy or cutting a deal with Charles Ergen. The bankruptcy option would leave Sirius XM in the hands of its banks and wipe out its equity holders.
At this point, it seems that Mel Karmazin is backed into a corner.
[Wall Street Journal]
In fact, Ergen is said to believe that Satellite Radio is a compliment to his Satellite TV operations.
Charles Ergen is the co-founder and CEO of EchoStar Communications Corp., the former parent company of Dish Network.
WSJ suggests that Ergen's overture shows that he's been planning his run at Sirius XM for some time. EchoStar began accumulating the company's debt several months ago, according to people familiar with the situation.
Last week, EchoStar acquired $175 million in debt that matures on February 17th - a move that could determine the company's fate.
Sirius XM had been in negotiations with the hedge fund that held the notes to exchange them for more senior debt and equity. But before Sirius XM could reach a deal with the hedge fund, EchoStar stepped in and acquired the debt - giving Charles Ergen more leverage.
In discussions with investors last week, Karmazin said that unless he could raise $175 million, he would be faced with one of two options: having Sirius XM file for bankruptcy or cutting a deal with Charles Ergen. The bankruptcy option would leave Sirius XM in the hands of its banks and wipe out its equity holders.
At this point, it seems that Mel Karmazin is backed into a corner.
[Wall Street Journal]
Not good. Ergen will screw everyone if he takes over. I hope Mel can pull off this rescue before that occurs.
Pay back time for Melvin! And Gary too! LOL
One must assume from these two options that Mr. Karmazin has another form of financing lined up, other than selling to Mr. Ergan.
At the very least, he owes the shareholders an explaination as to what's really going on, (without getting too specific)in order to calm all the wild speculative bankruptcy talk.
Fuck Mel, I hope he's screwed. Payback time for all the XM folks out of work.
Yeah, Besty, cause the first thing any investor wants to do right now is throw $175M into a flaming pile of crap.
Isn't it ironic, the company is going down in flames and Robin is buying $800 bottles of wine.
This just gets us by the $175 million due next week. What about the $800 million due during the rest of the year. I hope Mel has more going on than what's talked about in the article.
This thing is either going to finish very good, or very bad.
With all the rumors and misinformation that has come out over the past few months, i really dont believe anything i read anymore--Look at the source of this too--Its not even from the US--a short perhaps?
The Board won't let Mel take the company into BK as long as there is an offer from Ergen that doesn't dilute shareholders any worse than the 8 Billion shares already approved.
I heard a news story that SIRIUS will most likely go out of business this year, I must say I'm not too surprised being they are bleeding cash and then throw in a recession/ depression what ever you want to call it, they're toast!If this is true, then off to Slacker!
I've worked with Echostar before (a company I worked for was designing a hardware addon for our system with Echostar engineers cooperation), and all I can say is this...
THIS WILL END VERY VERY VERY BADLY.
I'd go more into what happened, but knowing E*'s history of suing ppl who speak ill of the company, just trust me that allowing Charlie or E* to touch SiriusXM will make it even WORSE then before.
I'm getting tired of the "Deer caught in the headlights" look of Mel. Post a pic of Ergen.
WOW, what can you say. Anyway you look at it, the economy is horrible, the auto industry is in the brink of destruction. Now your going to have to pay extra for online listening. I have 4 subs, been with sirius for at least 4 years. I'm a share holder, anyway around it, it's not going to be pretty!!! Am I going to keep all 4 subs, no I'll more than likely get rid of 2 of them. Am I going to pay extra for online listening, or rather extend my sub to lock in not having to pay extra, not sure?? It just all really bite's!! Just bad timing, all the way around!!
Dilution by issuing the full 8 billion shares:
I honestly don't think it would be possible for Mel to issue the remaining 4.5 billion shares... who would these shares go to? Likely a few big buyers would buy them, and then in effect they would have control over the firm. When Sirius issued shares during the XM takeover those shares were issued to all the thousands of XM shareholders, so there was no 1 player buying up everything.
If Mel issues the shares now, it would probably be just 1 or 2 guys buying up the lot, and then they would have control.
I hope Mel is homeless soon!
I don't know how I'd feel if I were a shareholder, but as a listener -- and a customer of both Sirius XM and Dish Network -- I'd be willing to roll the dice on Ergen. What Sirius XM has done with programming flies in the face of all logic and has caused the loss of thousands of loyal listeners. (The actual number? Who knows, since Sirius has cooked the subscription-number books for years.)
A service run by a bean counter would be preferable to what we have now -- big name DJs in love with their voices, grossly-overpaid "shock jocks," and the questionable insight of programmers who still act like they're trying to eek an additional ratings point out of a terrestrial station and don't have a clue what satellite listeners want. Give me a tech guy who's actually made a success of something rather than a big media type who's been a major force in destroying terrestrial radio and is now working his "magic" on satellite radio.
I wonder if this company has any idea what anxiety and frustration they have inflicted on millions of people with their indifferent and belligerent
attitude towards the subscribers.... and shareholders! Everything is a big secret, and everything they do is done in a stealth like way. They make being a subscriber a very unpleasant experience; this has to have an adverse affect on "word of mouth" promotion about the service - something that should not be underestimated. Predictably, Sirius/XM management most likely doesn't think of the cause/affect relationship of their behavior.
I can't think of the last time this company made an intelligent or logical decision about ANYTHING !
I'm just on the verge of canceling my subscription. I better NOT get the runaround or I go straight to the FCC. That is a promise. I expect prompt cancellation and no BS. Period.
Is Mel Being Played Or Is This Part Of Their Plan?
This is what I have been afraid of and warned about for quite sometime. Mel would drive the company as low as possible and allow private equity to take control of Sirius XM out of Bankruptcy or for pennies on the dollar after a one-for- fifty reverse split. The real question here is: “Is Mel being ‘played’ at his own game by Mr. Ergen and Mr. Clayton, or was this part of the plan all along?”
Mr. Clayton joins the Board of EchoStar/Dish within days after consummation of the merger between Sirius XM after under his leadership as Chairman of the Board and Mr. Karmazin as CEO. They totally destroy shareholder value and the company. During these years they violate Antitrust Laws and their FCC licensing Mandate which leads to the second largest FCC fine in history ($20,000,000).
Mr. Clayton is privy to Sirius XM’s proprietary information, including a new technology and CODEC, that will allow for a tripling of the current spectrum’s capacity. I wonder if he has shared this with Mr. Ergen. Better yet, why hasn’t Mr. Karmazin disclosed this in a press release as it would make this company worth more and enhance shareholder equity?
His friends call him Charlie.
Charlie has long been interested in the satellite radio business. When the FCC first auctioned off the original spectrum that XM and Sirius now use, he submitted documentation to the FCC notifying them of his intention to bid. At the last minute, prior to the start of actual bidding, Satellite CD Radio (Sirius) did a deal with him essentially paying him to stay out of the bidding.
One thing he knows how to do is run a business that makes money. Under E* you will see a very different kind of service. Howard will be gone but there will be much heavier emphasis on the music with much less DJ chatter. This is agood thing. He is already spending big money on advertising, customer service, technical operations, etc, so there are lots of real cost-saving synergies.
Promotionally there are many opportunities. For example I could see him offering packages of premium TV services that include free satellite radio for your car. This is something that DIRECTV cannot offer. So it makes some sense for him to get into this. Overall this can be a good thing for Sirius-XM subscribers adding some greatly needed financial stability.
As long as the transaction does not happen, this is a good sign for satellite radio. It shows that there is a very high interest within the media delivery market in satrad. This is good because it shows how strong (well, not strong, but at least lasting) Sirius XM SHOULD be. If companies feel they can make money off of this, they must feel the medium will not die and will live on.
Thoughts?
Fuck you Hartleib ... You were part of the problem! All your fucking lawsuits wasting $1000/hour attorney fee's. You sir are an ASSHOLE.
It would be hard for me to imagine Ergen or anyone else making dumber, more listener-unfriendly decisions than what Sirius has done to XM and XM listeners throughout this merger debacle, so to those who say that his taking over Sirius XM would be bad, I ask, "How?" What, exactly, could new management do that would make this service decline faster than it is already?
Testicle radio devolved into a dumbed down unlistenable mess which I assume it remains today in 2009. (I wouldn't really know given Stern 24/7 and my Ipod and pandora). All the excitement of a commercial free, deep musicologist alternative that emerged 5 years ago has suffered a steady deflating. There seems to be a pall over the whole thing now. Like it's in it's death throws. Or that Howie knows something we don't. Gawd, did all the fun come out this balloon...
There is no way two people with the egos of Charlie Ergen and Mel can coexist. Ergen will hardball everyone including HS. Between DISH, PocketDish, Slingbox, and SATRAD, we could see some interesting synergies.
I will be ecstatic if Ergen can force Mel Karmazin out. Satellite radio has already been destroyed in my eyes. The only way it can be worse then what Mel Karmazin has done to satellite radio is if they insert commercials on music stations. My take at this point is anyone but Karmazin.
Wake up people siriusxm is done, it has been over since before the "merge". There is nothing but weakness when it comes to the satellite radio industry. Subscribers continue to wise up and drop subscriptions for the complete waste of money they are. The tide has turned and local FM radio is coming back with a vengeance and has better talent, programming and sound quality than the newbs and suckers are getting from the dying fad known as pay satellite radio. Mel's "merge" MONOPOLY scheme showed nothing but a industry in deep decline and his arrogant and ego driven actions did nothing but speed the decline. Ergen is picking up a industry for penny's on the dollar (the worth of the satradio industry) Ergen might just be smart enough to shut the whole POS off and use the spectrum in better ways. Forget siriusxm (since it's already history) but even the radio spectrum deserves a better CEO. Mel f**ked FM radio, Mel f**ked CBS, and now history shows shows Mel has completely f**ked the entire satellite radio industry and all those invested in it from the automotive industry down to the individual investor and subscriber.
Forgive me, because I'm just a listener, but I don't see where this is necessarily a problem. If EchoStar can stabilize the debt situation they get a lot of assets, a product that's proven it has an audience, and another revenue stream. Not to mention product for Dish (which I also have and am very happy with) and SlingBox (an absolute gold mine).
Maybe I'm just dumb ...
Wow, the resident troll is back, and now posting under obviously fake names...
Here are some questions for you.
1) If Ergen keeps SatRad, will you decide to attack him as well as Mr. Karmizan?
2) I notice you don't say anything about the true possible heirs to SatRad--Internet Radio and platforms like Slacker and Pandora. This really makes you look like a shill for the NAB and/or FM. The only thing I ever see you plugging is HD radio.
3) Why insult the fans of SatRad. If you think it's a mistake, why go out of your way to insult them. You're taking Mel's mistakes WAY TOO PERSONALLY. Just stop it. And stop insulting people who don't think like you, okay?
It's over folks. You got 60 million in Cash to pay MLB next month and probably another 100 million (at 6% Gross Revenues) for the annual payment to the Copyright Royalty Board, both due in March.
Mel will BK this thing, and then petition the judge to revoke the MLB contract, and suspend the payment to the Copyright Royalty Board, and then get the 120 million held in Escrow released.
To all of those that have just pre-paid a long term contract in the last few weeks. Oh! Well... No more MLB, but the price doesn't go down. And by the way.. Go ahead and unsubscribe, because they don't care. You see. They keep you in the subscriber rolls because you already paid to subscribe in advance. i.e. Prepaid.. So they don't really care.
Maybe another SDARS company can pick up the MLB deal. Uhh! Never mind. I forgot. There is no "other" SDARS company anymore.
This whole merger thing is workin' out exactly how the NAB told you it would. Good job writing all those comments supporting the merger. You wanted it. You got it!
And so it goes,
PCSTEL
Yes, if you're looking for a "buy low" opportunity, as smart businesspeople always are, this has to be it. Get rid of the overpriced garbagemouths, give us some well-programmed music channels like those XM had, keep the news/talk (one area they haven't screwed up too badly yet) and I'll be in this for the long haul.
xcountry,
"Get rid of the overpriced garbagemouths, give us some well-programmed music channels like those XM had, keep the news/talk (one area they haven't screwed up too badly yet)"
OK, But technology has grown up and costly satellite technology is no longer needed. You can find all your asking for on your local FM radio for FREE.
siriusxm...done
"The tide has turned and local FM radio is coming back with a vengeance and has better talent, programming and sound quality than the newbs and suckers are getting from the dying fad known as pay satellite radio."
Tell me something, Dope-Ra - when exactly did the tide reverse itself, and how come you are the only person on the planet that is aware of this seismic shift in the radio landscape? I had to get in a non satellite radio equiped car today, and the person driving told me to listen to whatever I wanted - he was listening to FM. I figured I could find something better than the crappy station he had on, so I started perusing the dial for something listenable. Let's just say that my initial skeptcism was justified; I NEVER HEARD SUCH ABSOLUTE HEINOUS SHIT IN MY LIFE COMING OUT OF A CARS DASHBOARD !!! The tide hasn't turned, my friend - it went out to sea a long time ago and it took the beach, the boardwalks, and the ocean front houses with it. The Titanic will resurface and start boarding passengers before terrestrial radio will ever come back from where it currently resides - OBLIVION !
Terrestrial radio isn't coming back, and in fact it isn't going anywhere. It is a dinosoar, and will likely suffer the same fate as all the preceeding of the same species - EXTINCTION.
There is nothing wrong with satellite radio that an infusion of creativity, common sense, customer compassion and some programming tweaks can't solve. An improved economy wouldn't hurt, needless to say! If these fundamental issues were addressed by management, instead of being so casually dismissed, subscriptions would come back with a vengeance. That's a lot of ifs, I grant you.
Satellite radio may be on life support, but terrestrial radio lost its pulse a long time ago; everytime I turn it on, it's like going to a wake!
Hopefully ergen can pull this off,
I became a shareholder today instead of buying my Big Mac meal for lunch...
"There is nothing wrong with satellite radio that an infusion of creativity, common sense, customer compassion and some programming tweaks can't solve."
I would love to agree with you, Steve O, but with the following tweak: instead of saying, "customer compassion," how about saying, "subscriber compassion?" I'm afraid that the typical Sirius XM "customers" nowadays are the has-been recording artists buying single-artists channels - at the expense of crucial channels such as the Bridge - instead of the everyday people like you and me who subscribe to satellite radio.
um, er, uh, duh, look... I have been uh, er uhm, duh, watching, the uhm, er, duh uh president’s uhm er uh duh er um duh uhm uh look... nevermind... Who um ah um er ah... hmmm uh due process ah look... um er ah look.... my view is um... uh...er ah... um er look..... ya... ah like I said... er ah look... ? Forward, not uh backward.... money...um satrad!
Right now I don't care if SatRad goes bankrupt, I don't like the new line up they say they are proud to have. I have been a subscriber for more than 4 years and I was proud of XM, XM had music for everybody, MUSIC not DJs talking. Now XM or SiriusXM is like FM with no commercials. Sad but true.
Big Al,
I have made the necessary tweaks in my head for future reference; thank you for scrutinizing my comments - I get out of control sometimes! It's all a matter of semantics, I surmise.
sillybilly,
That sounded exactly like Bush at his last press conference, only more articulate.
I'm somewhere between you, Steve_O, and the pro-FM posters up there. I have one car with satellite radio and one without, so I go back and forth some. Honestly, on some formats, such as modern rock, I've heard some FM stations that beat any single format now available on Sirius XM. But, yes, the majority of terrestrial stations, especially in a format like Hot AC or country, are dull and predictable, playing the same worn out songs...just as many Sirius XM channels now do.
But what satellite does still offer is variety, with far more choice than any group of terrestrial stations available in a given locale. Yes, I can get online and find audio streams of terrestrial stations all around the country, and from this huge group I could definitely cherry-pick a group of them that are as good as -- or likely better than -- what Sirius XM has. But Sirius XM does offer a complete programming package that's easy to access and available anywhere I go. The trend is currently not good, I admit, with less and less difference between satellite and terrestrial radio, which is why I want to see a return to good XM-style channels.
xcountry,
I agree with you. I tend to "go off" on terrestrial radio, but as with everything else, there are exceptions. I live in upstate NY, and the ONLY consistently good FM station is a modern rock/alternative one out of Manchester VT (WEQX). I am quite a distance away, but I can get decent reception. Other than that, it's a classical station and occasionally a college station out of Troy NY will play some good music. Everything else, and I mean EVERYTHING, is pure unadulterated crap!
This FMinization of satellite radio bothers the hell out of me. I never had X/M, but I have had Sirius for long enough (over 3 years) to realize that the programming has been weakened. I notice more than ever the disturbing trend of songs being repeated with greater frequency, so much so that I have to check and make sure I'm not listening to FM. The addition of perky, lame DJ's with their forced personalities and lowbrow humor is also narrowing the gap between satellite and terrestrial. I want to grab Karmazin by the neck, and wring the shit out of him! Does he not read what we're writing, or hear what we're saying? The whole thing is a bad nightmare at this point, and if you're an invester like me, it is a horror show.
I have to believe the "XM" contingent out there knows what's up; there are too many pissed off listeners who miss the XM style that Mel has destroyed. I bought into the hype and the promises of satellite radio becoming not only a better buy, but a better listening experience once the merger was consumated. They lied to us then, and they continue to lie. The deception and the deceit with which these insane clown pussies operate floors me! They treat the subscribers as a mere afterthought, and it begs the obvious question; WHY?
They are taking away everything that made satellite radio unique. If this trend continues, it will be GAME OVER, and then I will start listening to that one FM station that doesn't suck like all the others.
"it will be GAME OVER, and then I will start listening to that one FM station that doesn't suck like all the others."
good luck on finding one!
zzzzzzzzzzzzz,
Other than the one station I mentioned, all the luck in the world won't help the abysmal terrestrial radio situation where I live. It doesn't get much worse than around here, and that's why I switched to satellite. Now that they are destroying Sirius/XM, I have to wonder if ANY radio will be worth listening to in the future. Oh well - I still have my CD's and a good stereo to play them on.
Steve O if you think it sucks in up sate New York you should try driving out west.
I live in Wyoming and the FM options in this neighborhood are even worse.
I would hate to see SATRAD go away just because there is no better option for radio in a lot of places especially for those who travel. It would be very tough to stay up with new music if your best option is the trusty CD player.
I am up for anything at this point whether it be a buy out or the lynching of Mel. Satellite radio has to stay in play more because I want my investment back after shares took a shit, but also because what the hell options do we have for terrestrial radio. We have all seen what an arrogant worthless piece of shit Mel is and ride he took all the investors on. I say I have already lost thousands in stock with Mel what the hell let’s see what EchoStar can do with the hundreds sorry tenths of a hundred I have left.