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The deal comes a little more than a year after SiriusXM invested $480 million in Pandora for a 15 percent stake in the company, though rumors at the time suggested that SiriusXM had wanted to acquire Pandora outright.
For most of its history, Pandora has more or less been an internet radio platform that offered users personalized stations. However, the company launched its on-demand Premium service last year to take on Spotify and Apple Music in the U.S. — and this was likely a key driver in SiriusXM’s decision to buy Pandora as it gives it an immediate inroad into home and mobile music-streaming. Plus, Pandora has been transitioning into an audio-focused ad-tech company, evidenced by its recent $145 million acquisition of Adswizz. The ability to offer programmatic “self-serve” ad-buying will have been a major selling point for SiriusXM too.
“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,” noted SiriusXM CEO Jim Meyer. “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.”
The fact that the acquisition is an all-stock deal and involved no cash is telling — Pandora is currently trading at around $9, well below its 2011 $16 IPO price. The acquisition is still subject to approval by Pandora shareholders, but interestingly Pandora said that it may still solicit offers from other interested parties — the so-called “go-shop” provision effectively keeps Pandora’s options open before the acquisition is concluded. This positions SiriusXM as something akin to a stalking horse bidder.
Should SiriusXM emerge as the winning buyer, it said that the Pandora brand and products will continue.
“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,” added Pandora CEO Roger Lynch. “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.”