SiriusXM Acquires Pandora For $3.5B and Why It Matters

[UPDATED] SiriusXM will acquire Pandora in an all stock transaction valued at $3.5 billion. The combined companies create what they are calling "the world's largest audio entertainment company" with $7 billion in expected 2018 revenue. 

SiriusXM has been interested in Pandora for more than a year. Last summer, the satellite broadcaster invested $480 million in cash in Pandora in exchange for a 19% stake.

Why It Matters

Following the completion of the transaction, there will be no immediate change in listener offerings, according to both companies.  But that will change.

SiriusXM is the leader in subscription radio and Pandora still (just barely) holds the crown as the largest audio streaming platform in the U.S.  But both are feeling increased pressure as Spotify, Apple Music and other streamers and podcasters become easier to access in the car and on smart speakers. 

Broadcast radio, which has been feeling the same pressure from streaming, will now also have to fend off the combined strength of SiriusXM and Pandora.

SiriusXM has thus far failed to attract significant listenership online and in the home. But Pandora's music platform could enable SiriusXM to significantly expand its presence beyond vehicles.

The combined company says that it will drive long-term growth by:

• Capitalizing on cross-promotion opportunities between SiriusXM's base of more than 36 million subscribers across North America and 23 million-plus annual trial listeners and Pandora's more than 70 million monthly active users, which represents the largest digital audio audience in the U.S.
• Leveraging SiriusXM's exclusive content and programming with Pandora's ad-supported and subscription tiers to create unique audio packages, while also utilizing SiriusXM's extensive automotive relationships to drive Pandora's in-car distribution.
• Continuing investments in content, technology, innovation, and expanded monetization opportunities through both ad-supported and subscription services in and out of the vehicle.
• Supporting and strengthening Pandora's  brand.
• Creating a promotional platform for emerging and established artists, curated and personalized in ways to deliver the most compelling audio experience that connects artists to their fan bases, as well as new listeners.

Jim Meyer, Chief Executive Officer of SiriusXM:

"We have long respected Pandora and their team for their popular consumer offering that has attracted a massive audience, and have been impressed by Pandora's strategic progress and stronger execution. We believe there are significant opportunities to create value for both companies' stockholders by combining our complementary businesses. The addition of Pandora diversifies SiriusXM's revenue streams with the U.S.'s largest ad-supported audio offering, broadens our technical capabilities, and represents an exciting next step in our efforts to expand our reach out of the car even further. Through targeted investments, we see significant opportunities to drive innovation that will accelerate growth beyond what would be available to the separate companies, and does so in a way that also benefits consumers, artists, and the broader content communities. Together, we will deliver even more of the best content on radio to our passionate and loyal listeners, and attract new listeners, across our two platforms."

Roger Lynch, Chief Executive Officer of Pandora:

"We've made tremendous progress in our efforts to lead in digital audio. Together with SiriusXM, we're even better positioned to take advantage of the huge opportunities we see in audio entertainment, including growing our advertising business and expanding our subscription offerings. The powerful combination of SiriusXM's content, position in the car, and premium subscription products, along with the biggest audio streaming service in the U.S., will create the world's largest audio entertainment company. This transaction will deliver significant value to our stockholders and will allow them to participate in upside, given SiriusXM's strong brand, financial resources and track record delivering results."