Sirius XM Radio Inc. (SIRI:US) agreed to buy the connected-vehicle services business of Agero Inc. for $530 million, allowing the satellite-radio broadcaster to provide Web-connected services for cars such as safety and navigation.
The cash transaction is expected to be completed in the fourth quarter, New York-based Sirius said today in a statement. The Agero unit makes software that is embedded in vehicles for security and other purposes, Bill McLaughlin, a spokesman for Agero, said in an interview.
The deal, the first (SIRI:US) at the satellite-radio broadcaster since Sirius’s merger with XM Satellite Radio in 2008, would help build on Sirius’s bid to move beyond radio to so-called telematics, which connects cars with wireless technology. The company announced a partnership with AT&T Inc. last month that connects Nissan Motor Co. (7201) autos in North America with emergency support, stolen vehicle tracking and roadside assistance.
“We expect telematics to develop into a meaningful business for Sirius XM over time, and also provide some comfort to investors that Sirius XM has something to gain from the connected car, rather than simply facing more audio competition,” James Marsh, an equity analyst at Piper Jaffray Cos. in New York, said in a research note.
Marsh has the equivalent of a buy rating on Sirius’s stock.
Following today’s purchase, Sirius will provide connected-vehicle services, such as real-time navigation, to more automotive manufacturers, including BMW, Honda and Hyundai, than any other provider, according to the statement. Sirius, home to Howard Stern, currently offers radio and data services in more than 50 million vehicles.
“The transaction accelerates Sirius XM’s development in architecture supporting connected-vehicle services, as well as the ability to provide services over both satellite and cellular networks,” Sirius Chief Executive Officer Jim Meyer said in the statement.
Sirius fell 1.7 percent to $3.70 at the close in New York. The shares have advanced 28 percent this year.
John Malone’s Liberty Media Corp. (LMCA:US) gained majority control of Sirius in January. Liberty Media CEO Greg Maffei became Sirius’s chairman in April as part of a board shakeup. Mel Karmazin stepped down from the CEO job last year after clashing with Malone, who provided a $530 million loan to Sirius in 2009 that kept the broadcaster out of bankruptcy.
Meyer was named CEO permanently in April after more than eight years as Sirius’s president of sales and operations.
Morgan Stanley acted as financial adviser to Sirius. Closely held Agero is based in Medford, Massachusetts.
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