SiriusXM to buy Pandora in $3.5 billion streaming push

[September 24, 2018]   By Arjun Panchadar and Vibhuti Sharma

(Reuters) - Satellite radio firm Sirius XM Holdings Inc <SIRI.O> will buy music streamer Pandora Media Inc <P.N> in a $3.5 billion all-stock deal, as it seeks to build scale to battle heavyweight streaming rivals Spotify and Apple Music.

Sirius XM, controlled by media mogul John Malone’s Liberty Media Corp <FWONA.O>, has built a name supplying more than 175 channels to car drivers, but has largely trailed Pandora and Spotify Technology SA <SPOT.N> in mobile and streaming content.

Monday's deal gives the pair a market value of about $34 billion, topping Spotify's $31.2 billion and follows through on Sirius' purchase of a 15 percent preferred-stock stake in Pandora for $480 million last year.

Shares in Pandora, which has posted losses for at least the past eight quarters, initially soared 18.4 percent to $10.75 in premarket trading, topping an offer value of $10.05 based on Sirius' Friday closing price.

Sirius shares, however, fell 5 percent to $6.63 as investors worried the company had overpaid.

The deal, worth $2.68 billion at that offer price, is expected to generate more than $7 billion in expected pro-forma revenue in 2018. Analysts said the two businesses were largely complementary.

"SIRI cannot offer on-demand radio, and cannot offer customization, and Pandora offers both," said Michael Pachter, an analyst with Wedbush Securities in Los Angeles.
 

A person holds a smart phone with the Pandora app showing in New York U.S., June 9, 2017. REUTERS/Shannon Stapleton

"Sirius can merge Pandora’s radio business into its satellite subscription business, and can also begin to offer on-demand to its large installed base of satellite subscribers."

Pandora shareholders will receive a fixed-exchange ratio of 1.44 newly-issued SiriusXM shares for each share they hold.

The transaction is expected to close in the first quarter of 2019.

Allen & Co LLC and BofA Merrill Lynch are financial advisers to SiriusXM and Baker Botts LLP and Simpson Thacher & Bartlett LLP are providing legal counsel.

Centerview Partners LLC, LionTree Advisors LLC and Morgan Stanley & Co LLC are financial advisers to Pandora and Sidley Austin LLP is the legal counsel.

(Reporting by Vibhuti Sharma and Arjun Panchadar in Bengaluru; Editing by Sriraj Kalluvila and Patrick Graham)

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