SiriusXM Radio Acquiring Pandora for $3.5 Billion

Mega media mergers aren’t limited to video anymore.

Satellite radio operator SiriusXM and subscription streaming music operator Pandora Media Sept. 24 announced a deal under which SiriusXM will acquire Pandora in an all-stock transaction valued at about $3.5 billion.

The transaction, which has been approved by both the independent directors of Pandora and by the board of directors of SiriusXM, creates the world’s largest audio entertainment company, with more than $7 billion in expected pro-forma revenue in 2018.

The transaction is expected to close in the first quarter of 2019. It is subject to approval by Pandora stockholders, in addition to passing mustard with U.S. and foreign antitrust issues and regulations.

“We have long respected Pandora and their team for their popular consumer offering that has attracted a massive audience and have been impressed by Pandora’s strategic progress and stronger execution,” Jim Meyer, CEO of SiriusXM, said in a statement. “We believe there are significant opportunities to create value for both companies’ stockholders by combining our complementary businesses.”

Pandora’s more than 70 million monthly users would enable SiriusXM to significantly expand its presence beyond its more than 36 million subscribers across North America vehicles into the home and other mobile areas.

Leveraging SiriusXM’s exclusive content and programming with Pandora’s ad-supported and subscription tiers could create unique audio packages, while also utilizing SiriusXM’s extensive automotive relationships to drive Pandora’s in-car distribution.

“We’ve made tremendous progress in our efforts to lead in digital audio,” said Roger Lynch, CEO of Pandora. “Together with SiriusXM, we’re even better positioned to take advantage of the huge opportunities we see in audio entertainment, including growing our advertising business and expanding our subscription offerings.”

Pursuant to the agreement, the owners of the outstanding shares in Pandora that SiriusXM does not currently own will receive a fixed exchange ratio of 1.44 newly issued SiriusXM shares for each share of Pandora they hold. Based on the 30-day volume-weighted average price of $7.04 per share of SiriusXM common stock, the implied price of Pandora common stock is $10.14 per share, representing a premium of 13.8% over a 30-day volume-weighted average price. The transaction is expected to be tax-free to Pandora stockholders. SiriusXM currently owns convertible preferred stock in Pandora that represents a stake of approximately 15% on an as-converted basis.

The merger agreement provides for a “go-shop” provision under which Pandora and its board may potentially enter negotiations with parties that offer alternative (i.e. more lucrative) proposals. Pandora said it does not intend to disclose developments about this process unless the board acts on any superior bid.

“The addition of Pandora diversifies SiriusXM’s revenue streams with the U.S.’s largest ad-supported audio offering, broadens our technical capabilities and reach out of the car even further,” Meyer said.

 

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