Satellite radio companies XM Canada and Sirius Canada plan to merge in an effort to strengthen their competitive stance in the crowded audio entertainment industry.
The all-stock deal announced Wednesday is valued at about $520 million and includes $130 million in long-term debt.
The move comes after longtime speculation that the two companies would eventually combine their operations to save costs and put more satellite radio listeners under the same umbrella.
Their American counterparts, XM Radio and Sirius Satellite Radio, merged more than two years ago but the Canadian companies had been coy about whether they would follow suit.
Sirius Canada, a private company that is 40% owned by CBC Radio, 40% by Slaight Communications and 20% by Sirius XM in the United States, will end up with 58% ownership of Canadian Satellite Radio Holdings, the parent company of XM Canada.
“This all stock merger of equals now creates a leading Canadian media company,” said CSR chairman John Bitove, who will serve as chairman of the combined company.
“Standing together, Sirius Canada and XM Canada will become a stronger competitor in digital music and entertainment,” he told a conference call.
The combined company will have a total subscriber base of more than 1.7 million.
Satellite radio has been struggling to find a larger audience in Canada over the past few years, after enduring several setbacks.
The downturn of the automotive industry put a crunch on growth prospects for the companies as their business models relied on being installed in new vehicles.
Meanwhile, more Canadians have turned to portable music devices like Apple’s iPod. Then there’s the popularity of traditional radio stations, which haven’t suffered the same listener erosion that has been seen in the United States.
Sirius Canada chief executive Mark Redmond said the merger is the next logical step in the evolution of satellite radio in Canada.
“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,” Redmond said.
The transaction is subject to regulatory approval by the CRTC.
