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Merger Recommendations between Sirius Canada & XM Canada
- 1. Section 6: Team 54 Nikhil Vaidya, Mathew Merritt, Jessica Bond, Ruth-Anne Culliton, Anisha Mehta, Jeffrey Cobourn, Silvia Kusic Merger Integration Plan: SIRIUS Canada & XM Canada
- 3. Canadian Satellite Radio Holdings Inc, 23% SIRIUS XM, 37%CBC, 15% Slaight Communications, 15% Other Investors, 10% ShareholdersObjectives Decision Organizational Operational Marketing Financial Strategy Contingency Conclusion
- 4. 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 tooffer Dividends of $0.20 at FYE 2014 RecommendationsObjectives Decision Organizational Operational Marketing Financial Strategy Contingency Conclusion
- 5. MARK REDMOND President & CEO MICHAEL MOSKOWITZ President & CEO MICHAEL WASHINUSHI CFO MARK KNAPTON VP Operations JANET GILLESPIE VP Marketing JASON REDMAN CFO JOHN LEWIS VP Programming PAUL CUNNINGHAM VP Marketing AL MCNEVIN VP Customer Relations SHERRY KERR General Counsel Current Structure SIRIUS XM Objectives Decision Organizational Operational Marketing Financial Strategy Contingency Conclusion
- 6. MARK REDMOND President & CEO MICHAEL MOSKOWITZ COO MICHAEL WASHINUSHI CFO MARK KNAPTON VP Customer Relations JOHN LEWIS VP Programming PAUL CUNNINGHAM VP Marketing SHERRY KERR General Counsel Proposed StructureObjectives Decision Organizational Operational Marketing Financial Strategy Contingency Conclusion
- 7. Managing Layoffs Al McNevin 6 years ($470 000) Janet Gillespie 3 years ($235 000) Jason Redman 7 months ($0) Meet Individually Severance Package Restrict Access Immediately Letters of Recommendation Objectives Decision Organizational Operational Marketing Financial Strategy Contingency Conclusion
- 8. 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
- 9. Anticipated Synergies Cost Savings Revenue Growth • 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
- 11. $12.95/month Optimal 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
- 12. Proforma 2010A 2011E 2012E 2013E Revenues $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 $0.38 Dividends $- $- $- $- Condensed Income StatementObjectives Decision Organizational Operational Marketing Financial Strategy Contingency Conclusion
- 13. 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 $166,399,935 Cash & 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
- 14. Proforma 2010A 2011E 2012E 2013E EBIT/Interest Expense -1.9x 1.32x 5.94x 8.09x Total 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
- 15. Distribution Challenges Competing with free radio and customized music players OEM Partners request higher commission Low renewal rate Objectives Decision Organizational Operational Marketing Financial Strategy Contingency Conclusion
- 16. Transparency Encourage Constant Feedback Focus on necessary change Maintaining Employee MoraleObjectives Decision Organizational Operational Marketing Financial Strategy Contingency Conclusion
- 17. 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
- 18. 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
- 19. 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 tooffer Dividends of $0.20 at FYE 2014 ConclusionObjectives Decision Organizational Operational Marketing Financial Strategy Contingency Conclusion
Editor's Notes
- Who will form our management team?What is our integrated marketing strategy? What synergies will we realize and how? How will we finance the merger? How will we maintain employee morale? How do we mitigateriskin this merger?
- Why were they fired?Even number of people from Sirius & XM remain
- Within days up and running to avoid disruptions and interruptions
- - Discount if buy in first month, another discount in 2nd month…
- More variety (international), take radio hosts2nd = growth in volume to overcome
- Morale with employees…how to make a smooth mergerAddress uncertainty of key employees regarding future, address inconsistencies and standards, controls, procedures and policiesEnsure management controlsOngoing feedback
- Mitigate risk, layoff
- Financially pay off debt & offer dividends in 3 yearsThank you.