Satellite radio company Sirius XM Holdings will buy online music service Pandora Media in a $3.5 billion all-stock deal, Reuters reported.
The acquisition will help Sirius XM to battle the growing competition from streaming rivals Spotify and Apple Music. Apple on Monday announced the acquisition of music app Shazam to strengthen its presence in the digital music industry.
Sirius XM, controlled by media mogul John Malone’s Liberty Media, supplies more than 175 channels to car drivers, but has largely trailed Pandora, Spotify Technology and Apple in the mobile and streaming content.
India’s Reliance Industries (RIL), the promoter of Reliance Jio, earlier acquired Saavn, a global music OTT platform. The enterprise value of JioMusic and Saavn will be $1 billion plus, with JioMusic’s implied valuation at $670 million.
Sirius purchased 15 percent preferred-stock stake in Pandora for $480 million last year. The deal, worth $2.68 billion at the offer price, is expected to generate more than $7 billion in expected pro-forma revenue in 2018.
“SIRI cannot offer on-demand radio, and cannot offer customization, and Pandora offers both,” said Michael Pachter, an analyst with Wedbush Securities in Los Angeles.
“Sirius can merge Pandora’s radio business into its satellite subscription business, and can also begin to offer on-demand to its large installed base of satellite subscribers.”
Pandora has been trying to mark its position in an industry where competitors are routinely adding new features, giving away discounts and offering more content, including interviews with popular musicians.
Pandora stockholders will own 8.6 percent of the pro forma company on a fully diluted basis.
Sirius XM chief executive officer James Meyer said on a conference call that the company had been in talks with Pandora even before its Chief Executive Officer Roger Lynch took up the position in August last year.
Allen & Co and BofA Merrill Lynch are financial advisers to Sirius XM, while Centerview Partners, LionTree Advisors and Morgan Stanley & Co are financial advisers to Pandora.