SiriusXM to acquire Pandora

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In a move that it says creates the world’s largest audio entertainment company, digital radio platform SiriusXM and music streaming service Pandora Media have agreed a deal under which SiriusXM will acquire Pandora in an all-stock transaction valued at approximately $3.5 billion (€2.97bn). The new operation has more than $7 billion in expected pro-forma revenue in 2018 and strong, long-term growth opportunities.

This strategic 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 US audio streaming platform. Pandora’s powerful music platform will enable SiriusXM to significantly expand its presence beyond vehicles into the home and other mobile areas. Following the completion of the transaction, there will be no immediate change in listener offerings.

The combined company will drive long-term growth by:

  • Capitalising on cross-promotion opportunities between SiriusXM’s base of more than 36 million subscribers across North America and 23 million-plus annual trial listeners and Pandora’s more than 70 million monthly active users, which represents the largest digital audio audience in the US.
  • Leveraging SiriusXM’s exclusive content and programming with Pandora’s ad-supported and subscription tiers to create unique audio packages, while also utilising SiriusXM’s extensive automotive relationships to drive Pandora’s in-car distribution.
  • Continuing investments in content, technology, innovation, and expanded monetisation opportunities through both ad-supported and subscription services in and out of the vehicle.
  • Supporting and strengthening Pandora’s highly relevant brand.
  • Creating a promotional platform for emerging and established artists, curated and personalised in ways to deliver the most compelling audio experience that connects artists to their fan bases, as well as new listeners.

Jim Meyer, Chief Executive Officer of SiriusXM, 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 US’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.”

Roger Lynch, Chief Executive Officer of Pandora, said: “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 US, 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.”

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 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 reiterated its full-year 2018 guidance provided on July 25th, 2018, 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 reiterated its third quarter 2018 guidance provided on July 31stt, 2018, with revenue of $390 million to $405 million and Adjusted EBITDA of ($25) million to ($10) million.

 


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