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Cramer recommended Sirius Satellite Radio [SIRI
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] on Speculation Friday, saying he bets the government will soon be forced to stop stalling and allow Sirius to merge with XM [XMSR
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], a deal nearly a year in the making. But even if the deal doesn’t go through, Sirius is the better-positioned of the two, he said.
Cramer took a moment on Friday’s show to use his bully pulpit to express disbelief that the Feds continue to drag their feet on this deal on the grounds that it could be a monopoly. If the government is so worried about antitrust, why did it hold only one hearing on the far bigger, far more monopolistic Exxon-Mobil merger, Cramer wondered. Or how about the Chevron-Texaco deal? The reason things are stalled, as far as Cramer is concerned, is because lawmakers are all in the back pocket of terrestrial radio – a left-for-dead business that somehow sill has a powerful influence in Washington.
Regardless, Cramer gave the XM/Sirius deal a 75% chance of going through within the next two months. Here’s why:
- The combined company would have more offerings and pricing plans that have clear benefits for the consumer, which is precisely what the FCC is looking for.
- It’s just not an antitrust violation. Satellite radio makes up less than 5% of all radio, and neither XM nor Sirius is profitable. What sort of monopoly would that be?
- Current market conditions are so bad that it would be hard for the Feds to turn away this merger, especially given all the negativity and the huge decline in M&A.
If the deal is sealed, the cost savings for the combined company will be huge, Cramer predicted. Sirius, under $3 now, will likely go much, much higher.
If the deal breaks apart, Cramer said Sirius still works. It’s adding more subscribers and is expected to grow sales faster than its rival/partner, XM, even though it has greater operating losses. It’s also better prepared to expand outside of the players built into cars, where XM leads. Both are small and unprofitable, but Sirius’ higher sales growth makes it the clear winner to Cramer.
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