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Sirius Predicts $400 Million Combined Savings in 2009

Those are the ‘synergies’ of combining, assuming the merger goes through.

Sirius Satellite Radio and XM Satellite Radio would enjoy combined savings of $400 million in 2009 if they merge.

In financial guidance for the investment community this week, Sirius said based on preliminary analysis, the combined companies would have net income of $300 million next year before interest, taxes, depreciation and amortization.

The combined company would achieve positive free cash flow — though not counting satellite capital expenditures — for the full year 2009, Sirius stated. To date, neither Sirius nor XM has reported positive adjusted EBITDA or achieved free cash flow for a full year, it noted.

“The upside potential from this merger is significant,” said Sirius CEO Mel Karmazin, who would be CEO if the companies combine.

If the merger goes ahead, Sirius will be the surviving parent and XM a subsidiary.

“The preponderance of XM’s existing debt will require refinancing in connection with the merger,” Sirius stated. “Because of the refinancing, the combined company expects XM to incur incremental interest expense as a result of refinancing certain of its debt.

“Principally as a result of this higher interest expense at XM, among other factors, substantially more of the free cash flow before satellite capital expenditures in 2009 is forecast to be realized at Sirius, the parent company, than at XM. In addition, Sirius and XM expect to refinance certain debt in 2009 that is scheduled to mature during that year.”