Paperstand (XMSR, SIRI, TA)

The WSJ reports that the proposed $11.4bn merger of XM (XMSR) and Sirius (SIRI) sets up a crucial test for the nation's regulators: how to weigh the limits of consolidation against rapid changes in media technology. The deal is structured as a 50-50 "merger of equals," giving XM and Sirius shareholders an equal stake in the combined co, and potentially uniting a roster of talent. The agreement calls for Sirius CEO Mel Karmazin to serve as CEO of the new entity, which would have more than $2.3bn in long-term debt. XM Chmn Gary Parsons would be Chmn. But b/c XM and Sirius are the only 2 co’s licensed by the FCC to offer satellite radio in the US, the deal is likely to face significant regulatory obstacles. Broadcasters said yesterday that they will fight the proposed merger, and FCC Chmn Kevin Martin released an unusually grim statement saying that the 2 co’s will face a "high" hurdle, since the FCC still has a ‘97 rule on its books specifically forbidding such a deal which would need to be tossed. The transaction also requires the Justice Department's blessing. "The benefits to the subscribers are awesome," Sirius's Mr. Karmazin said in an interview. "We can combine [research and development] resources and come up with cooler, more advanced products that will satisfy them more. We're going to have the ability to negotiate better with our receiver manufacturers."

“Heard on the Street” column out on TravelCenters (TA), whose stock has popped 38% since Feb. 1, when the co was listed on AMEX. The co was spun off from Hospitality Properties Trust (HPT). Article suggests, investors should be aware of the relationship between the truck-stop operator and its former owner. TravelCenters warned in its own prospectus: "We were formed for the benefit of Hospitality Trust and not for our own benefit." As a result, the co continued, "some of our contractual relationships and the terms of our initial operations may provide more benefits to Hospitality Trust than to us." TravelCenters' spinoff is part of an increasingly popular trend among REITs. These trusts have been buying property-rich firms, keeping the real estate and setting up separate operating co’s that pay rent back to the REITs, which are exempt from paying taxes on that income. Barry Portnoy, Chmn of REIT Mgmt & Research, has set up similar deals in the past. He is a managing trustee of Hospitality, as well as a director of TravelCenters. "Barry Portnoy is a very smart investor, but all of his deals are fraught with conflicts, which frustrate a lot of institutional investors," says Rod Petrik, of Stifel Nicolaus.