Bear Stearns Upgrades Sirius Stock
By John Eggerton -- Broadcasting & Cable, 6/5/2007 9:01:00 AM
Bear Stearns has upgraded its rating on Sirius stock, saying a merger between Sirius and XM satellite radio companies is more likely than overly pessimistic "market sentiment" but that the stock is a good buy even if the merger doesn't go through.
Bear Stearns downgraded the stock in December 2006, concerned about a tough retail market and other factors. Analysts now say the merger issue has overshadowed a fundamental upside. "Regardless of which way the regulatory decision regarding the merger goes, we think the stock likely will trade higher once the decision is digested by the investment community," said the investment company in a report Monday.
Bear Stearns backs up its argument that the FCC could well approve the merger by arguing that there has not been a lot of negative push-back in Washington, except by the National Association of Broadcasters. While Bear Stearns refers to NAB maneuvering and "overt funding of independent reports," it does not mention that the chairman of the Senate Antitrust Committee has come out strongly against the deal .
Bear Stearns also points out that FCC Chairman Martin has not asked for public comment on the deal which would start the FCC's informal 180-day merger shot clock. "We think that if the FCC were out to kill the deal from the start, that they would have already started the clock."
But long merger reviews have not necessarily meant defeat. The Adelphia sale to Bell South/AT&T took over 400 days.
Martin has said the commission would look at the facts of the XM/Sirius case independently, as it does for any such review, but has also said that the FCC's stipulation when handing out the satellite licenses that one entity could not own both was a hurdle to the meld.
Bear Stearns is guessing Martin will put that stipulation out for public comment.
Bear Stearns puts a target price of $4 per share on Sirius at year-end 2008. It was trading at $2.86 at press time.
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