Sirius XM Holdings Inc. (SIRI, Financial) and Pandora Media Inc. (P, Financial) announced on Monday that the companies entered a definitive agreement in which Sirius XM will acquire Pandora in an all-stock transaction valued at approximately $3.5 billion.
Per the agreement terms, shareholders of Pandora are expected to receive 1.44 shares of Sirius XM per Pandora share.
Strategic rationale for merger
Sirius CEO Jim Meyer said the company has long admired Pandora’s “popular consumer offering,” which has attracted approximately 71.4 million active users since June 30. The addition of Pandora allows Sirius to leverage its brands with Pandora’s ad-supported music stream and further “expand [Sirius’] reach” beyond vehicles.
Pandora CEO Roger Lynch said on July 31 that second-quarter revenues increased 12% year over year, driven primarily by a 67% increase in subscription revenues and strong advertising hour trends over the past three quarters. New partnerships, including Snap Inc. (SNAP) and AT&T Inc. (T, Financial), give Pandora good potential to accelerate growth and ownership of “the expanding digital audio marketplace.”
Lynch said the merger with Sirius further allows Pandora to unlock shareholder value through Sirius’ “strong brand, financial resources and track record delivering results.”
GuruFocus ranks Pandora’s profitability 6 out of 10: Even though net margins are underperforming 82% of global competitors, Pandora’s operating margin and three-year revenue growth rate outperform 99% and 75% of global broadcasting-radio companies.
See also
Sirius traded 57 cents or 8.17% lower than its previous close of $6.98 while Pandora traded 22 cents or 2.48% higher than its previous close of $9.09.
Disclosure: no positions.
