SiriusXM just announced they will be investing $480M in cash into Pandora, which will give them a ~16% stake in the company on an as-converted basis.
While it’s not an full acquisition like was once rumored, this will give Pandora a much needed cash injection, as well as a strategic partner experienced in the radio business that might help steer it to more growth in a very competitive market.
The investment will come in the form of newly-issued Series A convertible preferred Pandora stock. $172.5M of the preferred stock was purchased upon execution of the deal, and the balance will be bought at a second closing.
Separately, EventBrite just announced they have entered into an agreement with Pandora to purchase Ticketfly for $200M. Pandora purchased Ticketfly in 2015 for $450M with the goal of monetizing Pandora’s listeners by selling them tickets to live events.
The Ticketfly acquisition was meant to help Pandora develop alternative revenue streams — specifically around events and, obviously, ticket sales — but anecdotally we’ve heard one former employee at Ticketfly describe it as a “technical shitshow.” The significant drop in enterprise value between the $450 million that Pandora paid for it, and the $200 million that Eventbrite is paying to pick it up, could also point to that.
Yesterday, we reported that Pandora and KKR, a private equity firm that had previously agreed to buy $150M in Pandora Series A Preferred Shares had extended that agreement to allow it more time to close. However, there were also rumors that SiriusXM would step in as a strategic investor to acquire a “substantial minority investment in the company”.
This preferred stock will bear a 6% cumulative cash dividend for SiriusXM – which makes the deal particularly sweet. The preferred stock can also be converted into common stock at a price of $10.50 per share, which is a 14.2 percent premium to Pandora’s average stock price over the past 20-days. This
As part of the deal SiriusXM will get three seats on Pandora’s (now nine-person) Board of Directors, with one of those acting as Chairman. And, the financial stake for SiriusXM is large enough that they have an incentive to make sure Pandora rights the ship and figures out how to fight back against Spotify and Apple Music.
“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,” Tim Leiweke, a member of Pandora’s Board of Directors, explained in a statement.
And of course if SiriusXM ever decides to revisit acquiring Pandora in the future, they will already own a sizable chunk of the company.
Today’s deal means that KKR will no longer be taking a stake in Pandora, and Pandora will subsequently pay KKR a $22.5M termination fee, which is common practice when a deal falls through at such a late stage.