How do I merge two *.srt files

This is pretty trivially done, since .srt files are just text files that contain time stamps -- all you need to do is add the length of cd1.avi to the times of all the subtitles in cd2.srt. You can find the length of cd1.avi with ffmpeg:

ffmpeg -i cd1.avi  # Look for the Duration: line

And then add that to cd2.srt using srttool

srttool -d 12345 -i cd2.srt  # 12345 is the amount to add in seconds

or:

srttool -a hh:mm:ss -i cd2.srt  # The first subtitle will now start at hh:mm:ss

Then you should just be able to concatenate the files together and renumber:

srttool -r -i cd.srt

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I picked srttool because in Arch it comes with transcode, which you installed for this question; there are lots of other tools that can shift and merge .srt files too, and at least one website, submerge