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Merger Buzz Drives XM, Sirius Stocks

Wall Street cheered news of the merger announcement between XM Satellite Radio and Sirius Satellite Radio Tuesday, with Sirius stock jumping 6% while XM gained 10%.

One day after the all-stock deal was unveiled, XM stock jumped $1.43 each to close at $15.41 per share, while Sirius shares gained 22 cents, closing at $3.92.

The biggest risk with the merger is that regulators will quash the deal. XM and Sirius said they hope the Federal Trade Commission and Federal Communications Commission will approve the deal by the end of the year.

Credit Suisse analyst Bryan Kraft said in a research note Tuesday that XM and Sirius stocks will be impacted by two factors: “How much the market believes the synergies are and the perceived probability that the deal receives regulatory approval from the FCC and [the Department of Justice].”

Oppenheimer analyst Tom Eagan said he expects regulators to sign off on the deal.

“We believe it’s likely that regulators will approve the satellite-radio merger

because the audio industry has changed significantly since two [satellite-radio] licenses

were granted (with the introduction of MP3 players, including the iPod, and the coming impact of Internet radio and HD radio),” Eagan wrote in a research note Tuesday.