Canada's two satellite radio companies have finally merged. On Wednesday, XM Canada parent company Canadian Satellite Radio Holdings (TSX:XSR) (CSR), and Sirius Canada, said they have agreed to combine in an "all-stock merger of equals", with an enterprise value of approximately $520 million.
Under the terms of the deal, Sirius Canada shareholders will be issued treasury shares of CSR, representing a 58% equity interest in the company.
After the deal closes, CSRI, an entity controlled by the chairman of CSR, will hold a 22.7% stake; CBC/Radio-Canada will hold a 15% equity interest; Slaight Communications will have 15%, with Sirius XM Radio (Nasdaq:SIRI) holding a 37.1% stake. The remainder is being widely held, the companies said.
On a 12-month basis, the combined entity will have pro forma revenues in excess of $200 million, pro forma EBITDA of approximately $7 million, and long-term debt of roughly $130 million.
"The benefits of a merger are clear and together we'll be better able to create more growth and opportunity for shareholders, accelerate technological innovation and ensure that satellite radio is able to compete in the rapidly evolving audio entertainment industry," said current Sirius Canada president and CEO Mark Redmond.
Indeed, the merger will allow the two companies to create a stronger platform, with content and programming relationships and distribution agreements with automakers and retailers nationwide.
The companies said its combined subscriber base, which will total over 1.7 million, will continue to be offered a range of commercial-free music, plus sports coverage, news, talk and entertainment programming. Synergies of approximately $20 million within 18 months are expected from the merger.
CFO of XM Canada, Michael Washinushi, commented on the benefits of the deal: "The synergies and our intention to exchange the outstanding senior notes will create a significantly stronger balance sheet for the company, enabling us to further pursue high-return growth opportunities."
John Bitove will remain chairman of CSR. Redmond and Washinushi will retain their positions as president and CEO of Sirius Canada and CFO of XM Canada, respectively. Michael Moskowitz will also remain as CEO of XM Canada.
The deal will as well benefit CBC/Radio-Canada, allowing it access to a broader audience throughout North America for its content.
The transaction, which is subject to various approvals, including that of the Canadian Radio-television and Telecommunications Commission, is expected to close sometime next year.
CSRI, which currently holds a 77.0% voting interest in CSR, has agreed to vote in favour of the deal. Both boards have already approved the merger.
CSR was up more than 15% on Wednesday, trading at $3.75 as of 12:57pm EST.