merger recommendations between sirius canada & xm canada
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Section 6: Team 54Nikhil Vaidya, Mathew Merritt, Jessica Bond, Ruth-Anne Culliton, Anisha Mehta,
Jeffrey Cobourn, Silvia Kusic
Merger Integration Plan: SIRIUS Canada & XM Canada
Management Team
Marketing Strategy
Synergies
Risk
Employee Morale
Finance
SiriusXM Merger
IssuesObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Canadian Satellite Radio Holdings Inc;
22.7%
SIRIUS XM; 37.1%
CBC; 15.0%
Slaight Communica-tions; 15.0%
Other Investors; 10.2%
ShareholdersObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Organizational: Lean Management Team Operational: Focus on OEM Penetration
(Cost-Effective Marketing) Marketing: Various Tactics to Enhance the Product and
Revenues Financial: Existing Strategy ($150MM Debt Issuance)• Pay off Mezzanine Debt Portion by FYE 2012• Pay off 20% of outstanding Senior notes per year• Projected to offer Dividends of $0.20 at FYE 2014
RecommendationsObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
MARK REDMOND
President & CEO
MICHAEL MOSKOWITZ
President & CEO
MICHAELWASHINUSHI
CFO
MARKKNAPTON
VP Operations
JANET GILLESPIE
VP Marketing
JASON REDMANCFO
JOHN LEWISVP
Programming
PAUL CUNNINGHAMVP Marketing
AL MCNEVINVP Customer
Relations
SHERRY KERRGeneral Counsel
Current Structure
SIRIUS
XM
Objectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
MARK REDMOND
President & CEO
MICHAEL MOSKOWITZ
COO
MICHAELWASHINUSHI
CFO
MARKKNAPTON
VP Customer Relations
JOHN LEWISVP
Programming
PAUL CUNNINGHAMVP Marketing
SHERRY KERRGeneral Counsel
Proposed StructureObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Managing Layoffs
Al McNevin6 years
($470 000)
Janet Gillespie3 years
($235 000)
Jason Redman7 months
($0)
Meet Individually
Severance Package
Restrict Access Immediately
Letters of Recommendation
Objectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Managing Restructuring
• Same Salary• Signing Bonus• Stock Options
Michael Moskowitz
XM President & CEO
Sirius XM COO
Mark Knapton
XM VP Operations
Sirius XM VP Customer Relations
Stock Options
Sirius XM Executives
10.2%
Objectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Anticipated Synergies
Cost Savings
RevenueGrowth
• Accounting• Customer care• Call centre• HR• PR• Administration• IT• Website• Economies of Scale• Decreased Internal Development•Minimizes Competition
•2011: 18%
•2012: 12%
•2013: 9%
Objectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Integrated Company CulturesObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
$12.95/monthOptimal Price
Discount Model• Time-sensitive
discount options• 1st week = 20% • 1st mo. = 15%• < 3rd mo.= 10%
Customization• A la carte• “Best of”
Channels• Keep most
popular channels from each
• Remove overlapping channels and replace with international channels, move programming from local radio, etc.
OEM• Toyota (9% of all
cars but only 15% penetration)
• Cheaper• More exposure
Retail
Marketing Focus• Smartphones• Quality not
Quantitiy• Various listening
platforms for one price
• “Pennies a Day”
Free-Trial• 3 month limit
Price Product Place Promotion
Marketing StrategyObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Proforma 2010A 2011E 2012E 2013ERevenues $199,568,373 $235,490,680 $263,749,562 $287,487,022 Revenue Growth 18% 12% 9%Operating Expenses $231,562,545 $220,895,878 $215,562,545 $234,963,174 Realization of Synergies 80% 80% 100%Operating Income (Loss) -$31,994,172 $14,594,802 $48,187,017 $52,523,848 EBIT Margin -16.03% 6.20% 18.27% 18.27%Net Income (Loss) -$48,358,742 $3,650,031 $40,219,907 $46,179,138 Profit Margin -24.23% 1.55% 15.25% 16.06%Basic & Diluted EPS -$0.39 $0.03 $0.33 $0.38Dividends $- $- $- $-
Condensed Income StatementObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Effective
Interest Rate
Proforma
2010A 2011E 2012E 2013E
9.75% Senior Debt 9.75% $130,000,000 $104,000,000 $83,200,000 $66,560,000
Debt Repayment 20% 20% 20%
8% Convertible Notes 10.00% $18,993,225 $9,496,613 $- $-
Debt Repayment 50% 100% 0%
Preferred Shares - $- $- $- $-
Common Shares 10.125% $166,399,935 $166,399,935 $166,399,935 $166,399,935Cash & Cash Equivalents $31,258,413 $41,509,639 $86,599,376 $147,001,421
Retained Earnings -
$118,938,272-
$115,288,241 -$75,068,335 -$28,889,196
Condensed Financing ScheduleObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Proforma 2010A 2011E 2012E 2013EEBIT/Interest Expense -1.9x 1.32x 5.94x 8.09xTotal Debt/TEV 47.24% 40.55% 33.33% 28.57%Total Debt/Equity 89.54% 68.21% 50.00% 40.00%Return on Equity (ROE) -29.06% 2.19% 24.17% 27.75%
Forward Looking RatiosObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Distribution Challenges Objectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Maintaining Employee MoraleObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Timeline
Fire 3 executives and hold a meeting with all employees explaining the change
Mandatory meet & greet with new manager & employees
Hold monthly social events to
solidify corporate culture
Through intranet allow employees to constantly and
openly give feedback
Facilitate training programs to educate employees on new
policies and procedures
Objectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Organizational: External hiring
Marketing: If unsuccessful in penetrating OEM, then focus on retail
Operational: Internally develop portion of currently outsourced operations
Financial: If sales growth estimate is not met, alternative financing may be necessary
ContingencyObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion
Organizational: Lean Management Team Operational: Focus on OEM Penetration
(Cost-Effective Marketing) Marketing: Various Tactics to Enhance the Product and
Revenues Financial: Existing Strategy ($150MM Debt Issuance)• Pay off Mezzanine Debt Portion by FYE 2012• Pay off 20% of outstanding Senior notes per year• Projected to offer Dividends of $0.20 at FYE 2014
ConclusionObjectives
Decision
Organizational
Operational
Marketing
Financial
Strategy
Contingency
Conclusion