Pandora Gets $480 Million From Sirius XM, Sells Ticketfly

  • Online-radio provider to terminate $150 million deal with KKR
  • Deals come as Pandora struggles with continued losses

Sirius XM Holdings Inc. agreed to acquire a 19 percent stake in Pandora Media Inc. for $480 million, giving the satellite-radio provider a long-sought entree into the online-radio business.

In a separate transaction to improve its cash balance, Pandora sold the concert-ticketing business Ticketfly to Eventbrite for $200 million. The deals give Pandora a lifeline as the company adjusts to the shifting winds in the music industry, where on-demand downloading services like Spotify are on the rise.

Though not an outright sale, as had been discussed, the Sirius XM deal makes the satellite-radio company Pandora’s largest shareholder, with three seats on the board, including the chairmanship. Sirius XM, controlled by billionaire John Malone, will have to help Pandora contend with the fast growth of Spotify and Apple Music, along with the billions of dollars Amazon.com Inc. and Google are investing in music.

While Pandora has diversified into ticketing and artist services, investors such as the hedge fund Corvex Management LP have questioned that strategy and urged a possible sale because of losses and a tumbling stock price. Shares of Pandora rose as much as 7.1 percent to $9.01 in New York Friday, while Sirius XM fell as much as 1.3 percent.

Sirius XM is interested in Pandora’s large audience for online radio, which is a natural complement to its own large customer base for satellite radio. The sale of Ticketfly, for a fraction of the $335 million Pandora paid just a couple years ago, suggests Sirius is less enthusiastic about Pandora’s expansion into other businesses.

“SiriusXM is working hard to find new channels to acquire and convert drivers into paying subscribers and Pandora has access to 100 million-plus listeners,” said Stan Meyers, an analyst at Piper Jaffray & Co., in a research note. “A potential SiriusXM/Pandora bundle could make SiriusXM more valuable/stickier with subscribers, thereby reducing churn.”

Pandora will use the money to invest in its radio business, the companies said. The press release made no mention of Pandora Premium, the on-demand service the company has spent the past few years developing. Pandora co-founder and Chief Executive Officer Tim Westergren listed the on-demand service as the company’s top strategic priority for 2017.

Westergren returned to stewardship of the company in March 2016, replacing Brian McAndrews. While McAndrews was faulted by many employees for a lack of vision and leadership, the company’s fortunes haven’t improved much under Westergren. The stock has taken a beating, down 35 percent this year through Thursday, and the premium service arrived late.
Sirius XM had at times expressed interest in doing a deal for Pandora, though its executives have downplayed their desire for a merger on other occasions, saying Pandora was too expensive. After weeks of talks, Pandora and Sirius found common ground on the Oakland, California, company’s value, Bloomberg has reported.

The deal with Sirius XM means a planned $150 million investment in Pandora by private-equity firm KKR & Co. is canceled. Pandora agreed to terminate the KKR deal and pay a $22.5 million termination fee.

Sirius XM won’t be able to buy additional securities of Pandora for 18 months. Afterward, if one of its directors is serving on board, Sirius won’t buy more than 31.5 percent of Pandora’s securities without board approval.

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