Satellite radio company Sirius XM Holdings Inc has agreed to acquire Pandora in a $3.5 billion all-stock deal. The acquisition is a huge boost to Sirius XM in its attempt to shake off increasing competition from rivals, such as Apple Music and Spotify.
Pandora offers paid and free music streaming and boasts over 70 million monthly active listeners in North America, while Sirius XM has over 36 million users.
Under the terms of the agreement, shareholders of Pandora will receive 1.44 newly issued Sirius XM shares for each share they own. The companies said that the deal values Pandora at $10.14 per share, about 12% more than its $9.09 closing price on Friday.
Pandora has also been granted the option to look around for a superior deal. Sirius XM would receive $52.5 million as breakup fee, if Pandora gets a better offer from another company. The fee would rise to $105 million if the Pandora terminates the deal for other reasons.
Sirius XM CEO Comments
“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 Sirius XM’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,” said Jim Meyer, the chief executive officer Sirius XM.
Pandora CEO Comments
Roger Lynch, the chief executive officer of Pandora Roger had this to offer on deal, “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.”
The transaction has been approved by the boards of both companies, and they expect to close it in the first quarter of next year.
However, it is still subject to the approval of Pandora shareholders and customary closing conditions. Following the announcement of the deal today, Pandora stock rallied nearly 8% while Sirius XM stock shed off more than 4.7% in premarket trading.
The acquisition comes only 15 months after Sirius XM made a $480 million strategic cash investment in Pandora. Sirius was then allowed to appoint three executives to the board of directors of Pandora.