SiriusXM Makes $3.5 Billion Offer For Pandora

SiriusXM said Monday it has offered to acquire Pandora for $3.5 billion, a 13.8% premium on the current stock price. Read the release.

If the deal goes through, SiriusXM would be able to distribute its content beyond vehicles and gain both a subscription radio business and an ad-supported streaming business. It would have the opportunity to convert its ad-supported listeners to subscribers.

Pandora has 70 million monthly active users and 6 million subscribers. SiriusXM has 36 million paying subscribers, along with 23 million people on free trials automatically initiated with each car purchase.

“We believe there are significant opportunities to create value for both companies’ stockholders by combining our complementary businesses,” SiriusXM CEO Jim Meyer said in a statement.

SiriusXM and Pandora both declined further comment.

Combined, the two audio companies can cross-sell and create new packages that include talk radio content from SiriusXM on Pandora.

SiriusXM can help Pandora get distribution in cars through its existing relationships with auto manufacturers. SiriusXM’s own content – which includes exclusive talk radio shows – can be further distributed outside the car.

In a presentation to investors, SiruisXM committed to continuing Pandora’s advertising business. Having both a free, ad-supported offering and a paid offering will allow it to work with a larger pool of consumers and allow them to cycle between different offerings depending on their needs and willingness to pay.

Pandora’s turnaround

For Pandora, the acquisition comes as it’s been trying to find its way after a number of wrong turns. Its stock price doubled in the past six months, reflecting investors’ confidence as the company tried to turn itself around with the leadership of CEO Roger Lynch, who joined a year ago.

Pandora’s core advertising business had been struggling because Pandora was slow to offer programmatic despite its popularity among buyers, hurting its advertising business.

Pandora bought AdsWizz to kickstart a programmatic offering (which led to Spotify’s exit from the platform).

Pandora also made a several other missteps. It was late capitalizing on subscriptions, as it lagged behind developing an ad-free, paid offering, allowing competitors to scoop up subscribers.

And a plan to diversify via a ticketing platform failed, leading it to sell Ticketfly to Eventbrite in June 2017, before Lynch joined, at a steep loss.

SirusXM bought a 15% stake in Pandora for $480 million that same month, indicating that it’s had its eye on the streaming platform for some time.

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