SiriusXM Invests $480M In Pandora

SiriusXM and Pandora today announced an agreement under which SiriusXM will make a $480 million strategic cash investment in Pandora.

CNBC is reporting the partnership came together after a Sirius offer to buy the full company was rejected by Pandora, sources told CNBC. The chairman role for Pandora is likely to be filled by Sirius CEO Jim Meyer or Liberty Media CEO Greg Maffei after the investment agreement closes, the sources said.

Under the terms of the agreement, a subsidiary of SiriusXM will purchase an aggregate of $480 million in newly issued Series A convertible preferred stock of Pandora. SiriusXM purchased $172.5 million of Series A preferred stock upon execution of the agreement and has agreed to purchase the balance of the Series A preferred stock at a second closing. The Series A preferred stock will represent a stake of 19% of Pandora's currently outstanding common stock and a 16% stake on an as-converted basis.

The Series A preferred stock is convertible into common stock at a purchase price of $10.50 per share. The conversion price of the Series A preferred stock is approximately a 14.2% premium to Pandora's volume weighted average price for the 20-day period preceding June 9, 2017. The Series A preferred stock will bear a 6% cumulative dividend, payable in cash, accretion of the Series A preferred stock or a combination thereof.

Through this agreement, SiriusXM is making a strategic investment in the leading U.S. provider of ad-supported digital radio. With a loyal quarterly audience of nearly 100 million listeners in the U.S., Pandora is by far the leading player in the burgeoning digital audio advertising market. The capital provided through the SiriusXM investment will allow Pandora to make targeted investments and capitalize on opportunities to build on its position in the streaming radio business.

Jim Meyer

Jim Meyer, Chief Executive Officer of SiriusXM, said, "This strategic investment in Pandora represents a unique opportunity for SiriusXM to create value for its stockholders by investing in the leader in the ad-supported digital radio business, a space where SiriusXM does not play today. Pandora's large user base and its ability to provide listeners with a personalized music experience are tremendous assets. With its strong technology and new product offerings, we believe there are exciting opportunities for Pandora to accelerate its growth and increase value for Pandora and SiriusXM stockholders."

"Liberty Media (LMDIA) has long recognized the strength of the Pandora brand and the opportunities in the ad-supported digital radio market," said Greg Maffei, Chairman of the SiriusXM Board of Directors and Chief Executive Officer of Liberty Media Corporation (FWONK). "We are very supportive of SiriusXM's strategic investment."

Greg Maffei

When the transaction closes, three individuals designated by SiriusXM will be named to the Pandora Board of Directors. One of those individuals will serve as Chairman and SiriusXM designated directors will serve as select Board committee representatives. With these appointments, the Pandora Board will be expanded to consist of nine directors.

"Pandora's Board and management team are committed to driving stockholder value and have carefully evaluated alternative strategies as part of the process disclosed on May 8," said Tim Leiweke, member of Pandora's Board of Directors. "We are pleased that the conclusion of that process resulted in a major investment by SiriusXM. With this investment, we have the backing of one of the media industry's most successful investors and significant capital to accelerate growth. Pandora is now poised to advance to the next stage of the company's lifecycle. Lastly, this transaction ensures that Pandora stockholders get the benefit of additional capital from an important strategic investor who can help enhance stockholder value."

"The investment from SiriusXM infuses resources to help Pandora continue to grow and innovate," said Pandora CEO and founder Tim Westergren. "With the strategic review behind us, and a strong balance sheet, we look forward to focusing on business execution and the optimization of our strategy."