Corporate Finance

KKR to Invest $150 Million in Pandora

"We have positioned the company to evaluate any potential strategic alternatives, including a sale," a Pandora director says.
Matthew HellerMay 9, 2017
KKR to Invest $150 Million in Pandora

Streaming music service Pandora may have taken a step closer to a sale by securing a $150 million investment from private-equity giant KKR.

Under an agreement announced Monday, KKR will receive new shares of Series A preferred Pandora stock a month from now in return for its investment.

“Having secured a significant financial commitment from KKR to strengthen [Pandora’s] balance sheet, we have positioned the company to evaluate any potential strategic alternatives, including a sale, in the 30 days before the financing is set to close,” venture capitalist James M. P. Feuille, a Pandora board member, said in a news release.

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KKR’s investment could be increased to $250 million should Pandora decide to issue additional shares. The preferred stock is convertible into common stock at a conversion price of $13.50 per share. The stock closed at $9.94 in trading Tuesday.

“We are excited to support the long-term growth of Pandora with this investment,” said KKR partner Richard Sarnoff, who will become a Pandora director.

News of the investment came as Pandora issued a mixed earnings report. Its first-quarter revenue of $316 million fell short of the $318 million estimate, though it reported a loss of $0.24 earnings per share compared to an expected $0.34 loss.

Pandora recently followed in the steps of rivals like Apple Music and Spotify, launching a paid tier called Pandora Premium. But as CNBC reports, “With more competition than ever, the streaming company has faced challenges turning a profit.”

Hedge fund Corvex Management has pushed Pandora to sell some of its assets, while SiriusXM has been suggested separately as a potential buyer.

Pandora’s active listeners were 76.7 million at the end of the first quarter of 2017, down from 79.4 million a year ago. “A true pioneer in digital music, we believe that Pandora is uniquely positioned over the long term,” Sarnoff said.

Referring to KKR’s investment, Pandora CFO Naveen Chopra said, “A strong balance sheet gives us the ability to accelerate growth investments when appropriate and to compete aggressively in a rapidly changing, complex market.”