SiriusXM Buying Pandora For $3.5 Billion.

Story by INSIDE RADIO

SiriusXM Radio says it is buying Pandora in an all-stock deal valued at $3.5 billion. The satcaster says acquiring the pureplay webcaster will allow it to expand its service beyond cars and into homes and other mobile areas. The combination creates an audio entertainment powerhouse with more than $7 billion in expected pro-forma revenue in 2018.

SiriusXM says there will be “no immediate change in listener offerings” after the deal closes. Instead, it is initially focused on creating cross-promotional opportunities between the satcaster's 36 million North American subscribers and Pandora's 70 million monthly active users.

In a press release announcing the deal, the companies pointed to their complementary business models. SiriusXM derives the vast majority of its revenue from paid subscriptions while Pandora relies mostly on ad dollars from its free streaming service, although it has made progress in building subscription products. The companies plan to leverage each other’s audiences and content to create new audio packages, while also using SiriusXM's automotive relationships to drive Pandora's in-car distribution.

SiriusXM says it will continue to make investments in content and technology to expand revenue opportunities through both ad-supported and subscription services in and out of the vehicle. It also plans to build a promotional platform for emerging and established artists.

SiriusXM says the deal will allow Pandora to benefit from its scale, industry expertise and financial resources while the satcaster will gain from Pandora's mobile strength and ad capabilities.

SiriusXM already owns a 15% stake in Pandora after making a $480 million investment in June 2017. Under terms of the deal announced Monday (Sept. 24), Pandora shareholders will receive 1.44 newly issued SiriusXM shares for each share of Pandora they hold. Based on the SXM’s 30-day average share price, Pandora’s stock is valued at $10.14 per share for a 13.8% premium.

The merger includes a "go-shop" provision in which Pandora can solicit other offers from third parties.

SiriusXM CEO Jim Meyer said he sees “significant opportunities” by combining the 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,” Meyer said in a statement. “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.”

Pandora CEO Roger Lynch said merging with SiriusXM will better position the webcaster to grow its ad business and expand its subscription offerings. “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,” Lynch said.