Sirius XM will make a $480 million cash investment in the struggling music-streaming giant Pandora, the companies announced Friday.
Under the terms of the agreement, a SiriusXM subsidiary will buy an aggregate of $480 million in newly issued Series A convertible preferred stock of Pandora. That gives the satellite radio company a 19 percent stake in Pandora’s currently outstanding
However, the deal also slows down any effort for Sirius to buy additional Pandora securities for 18 months. In addition, Sirius must win approval of Pandora’s board of directors if it wants to acquire more than 31.5 percent of Pandora’s equity securities.
Through this agreement, SiriusXM gains access to Pandora’s 100 million listeners and its growing digital audio advertising market.
“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,” Jim Meyer, Chief Executive Officer of SiriusXM, said in a statement.
“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.”
After the deal closes, SiriusXM can name three people to the Pandora Board of Directors, including the chairman. With these appointments, the Pandora Board will be expanded to consist of nine directors.
“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.”
In closing this deal, Pandora agreed to scuttled a previous investment by an affiliate of Kohlberg Kravis & Roberts announced on May 8 — and to pay KKR a $22.5 million termination fee.