A Sirius-ly Big Deal For Audio Streaming


On Friday, Sept. 22, 2017, Sirius XM formally grabbed a piece of Pandora Media. It set the stage for a possible all-out acquisition by the satellite radio operation of a pioneering streaming audio entity that had somewhat lost its luster.

Just after sunrise on Monday (9/24), the two companies formally ended their year-long flirtation with a marriage announcement.

A definitive agreement has been reached between the Nasdaq-traded Sirius XM Holdings and the NYSE-traded Pandora Media that sees SiriusXM acquiring Pandora in an all-stock transaction valued at approximately $3.5 billion.

The combination creates “the world’s largest audio entertainment company,” Pandora announced, with more than $7 billion in expected pro-forma revenue in 2018 “and strong, long-term growth opportunities.”

As noted in a press release offered in full by RBR+TVBR early Monday, the transaction “builds on SiriusXM’s position as the leader in subscription radio and a critically-acclaimed curator of exclusive audio programming with the addition of the largest U.S. audio streaming platform.”

Further, Pandora’s music platform “will enable SiriusXM to significantly expand its presence beyond vehicles into the home and other mobile areas.”

SiriusXM and Pandora users immediately turned to RBR+TVBR, asking what this means for them.

The answer: Nothing.  Following the completion of the transaction, there will be no immediate change in listener offerings. But, the synergies between SiriusXM and Pandora clearly show that, for example, a Pandora stream powered by “The Bridge” or “70s on 7” is a possibility. Further, curated streams from Howard Stern or artist-focused streams tied to dedicated SiriusXM channels could be in the works — finally delivering to all Pandora users an artist stream that is fully of an artist’s music, rather than an algorithm-powered “if you like U2 then here are 14 similar artists by genre” music stream.

What is clear today is that SiriusXM wishes to leverage its “exclusive content and programming” with Pandora’s ad-supported and subscription tiers “to create unique audio packages, while also utilizing SiriusXM’s extensive automotive relationships to drive Pandora’s in-car distribution.”

This makes it clear that a combination of advertising and subscription revenue will keep profitability in place for the soon-to-be-bigger SiriusXM.

It also sends a message to the radio industry at a time when the “connected car” will soon be ubiquitous that it cannot rest on its long-standing dominance in the automobile, as SiriusXM has made it clear it wishes to dominate in audio content usage.

SiriusXM presently boasts more than 36 million subscribers across North America and 23 million-plus annual trial listeners. For its part, Pandora has more than 70 million monthly active users, which it boasts is “the largest digital audio audience in the U.S.” — although Pandora is very much being challenged by Spotify in the audio streaming universe.

The combination of SiriusXM and Pandora will also help to create “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.”

Commenting on the deal, SiriusXM CEO Jim Meyer 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.”

Allen & Company LLC and BofA Merrill Lynch are serving as financial advisors to SiriusXM.

Baker Botts LLP and Simpson Thacher & Bartlett LLP are serving as its legal counsel.

Centerview Partners LLC, LionTree Advisors LLC and Morgan Stanley & Co. LLC are serving as financial advisors to Pandora, and Sidley Austin LLP is acting as legal counsel.

Transaction Details

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 of Directors may actively solicit, receive, evaluate and potentially enter negotiations with parties that offer alternative proposals following the execution date of the definitive agreement. “There can be no assurance this process will result in a superior proposal,” Pandora notes. “Pandora does not intend to disclose developments about this process unless and until its Board of Directors has made a decision with respect to any potential superior proposal.”


The transaction has been unanimously approved by both the independent directors of Pandora and by the board of directors of SiriusXM.

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.

SiriusXM Reiterates Full Year 2018 Outlook

SiriusXM reiterated its full-year 2018 guidance provided on July 25, with self-pay net subscriber additions of approximately 1.15 million; revenue over $5.7 billion; adjusted EBITDA of approximately $2.175 billion, and free cash flow of approximately $1.5 billion.

Pandora Reiterates Q3 2018 Guidance

Pandora reiterated its third quarter 2018 guidance provided on July 31, with revenue of $390 million to $405 million and Adjusted EBITDA of between negative $10 million and negative $25 million.