SiriusXM has announced that it intends to acquire Pandora in an all-stock transaction, valuing Pandora at $3.5 billion. The transaction is still subject to approval by Pandora stockholders
The combination of Pandora active monthly user base of 70 million and SiriusXM’s 36 million-plus subscribers across North America, and 23 million-plus annual trial listeners, would create “the world’s largest audio entertainment company, with more than $7 billion in expected pro-forma revenue in 2018 and strong, long-term growth opportunities,” according to the announcement made on Monday, Sept. 24.
All brands, products and services by both companies are to continue unchanged. While Pandora intends to benefit from SiriusXM’s, industry expertise and financial resources, the satellite radio company can count on Pandora’s mobile strength, digital presence and advertizing capabilities.
What is more, the deal will get Pandora into the car – and the estimated $16m advertizing market for FM radio – which has been a big goal of the company, as Pandora CEO Roger Lynch said at this year’s Pollstar Live! conference.
SiriusXM will be able to expand its presence beyond vehicles into the home and other mobile areas.
The combined company will capitalize on cross-promotion opportunities between their user base, which would represent the largest digital audio audience in the U.S. once the deal’s through.
The transaction is expected to close in the first quarter of 2019. It is subject to approval by Pandora stockholders, expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and certain competition laws of foreign jurisdictions and other customary closing conditions.
Other plans include “leveraging SiriusXM’s exclusive content and programming with Pandora’s ad-supported and subscription tiers to create unique audio packages, continuing investments in content, technology, innovation, and expanded monetization opportunities through both ad-supported and subscription services in and out of the vehicle, supporting and strengthening Pandora’s highly relevant brand, creating a promotional platform for emerging and established artists, curated and personalized in ways to deliver the most compelling audio experience that connects artists to their fan bases, as well as new listeners,” according to the announcement.
For every share of Pandora they own, shareholders will get 1.44 of newly issued shares of Sirius XM, the companies said in their announcement Monday. Sirius XM owns about 15 percent of convertible preferred Pandora stock.
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 percent 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 percent on an as-converted basis.
Jim Meyer, chief executive officer of SiriusXM, said: “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. We believe there are significant opportunities to create value for both companies’ stockholders by combining our complementary businesses.
“The addition of Pandora diversifies SiriusXM’s revenue streams with the U.S.’s largest ad-supported audio offering, broadens our technical capabilities, and represents an exciting next step in our efforts to expand our reach out of the car even further.
“Through targeted investments, we see significant opportunities to drive innovation that will accelerate growth beyond what would be available to the separate companies, and does so in a way that also benefits consumers, artists, and the broader content communities. Together, we will deliver even more of the best content on radio to our passionate and loyal listeners, and attract new listeners, across our two platforms.”
Pandora CEO Roger Lynch added: “We’ve made tremendous progress in our efforts to lead in digital audio. 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.
“The powerful combination of SiriusXM’s content, position in the car, and premium subscription products, along with the biggest audio streaming service in the U.S., will create the world’s largest audio entertainment company. This transaction will deliver significant value to our stockholders and will allow them to participate in upside, given SiriusXM’s strong brand, financial resources and track record delivering results.”