SiriusXM has agreed to make a $480 million investment in Pandora, giving the music-streaming service a financial lifeline as it competes head-on with Apple Music and Spotify.
Pandora had been exploring potential “strategic alternatives,” including a sale, in the 30 days before the financing was set to close on an $150 million investment from private-equity giant KKR.
With Sirius’s investment, KKR will step aside, pocketing a $22.5 million termination fee. Under the terms of the deal, Sirius, which had been considering a merger with Pandora, will acquire newly-issued series A convertible preferred stock of the company, representing 19% of its current outstanding shares.
“This strategic investment in Pandora represents a unique opportunity for SiriusXM to create value for its stockholders by investing in the leader in the ad-supported digital radio business, a space where SiriusXM does not play today,” Sirius CEO Jim Meyer said in a news release.
As Variety reports, Sirius is “highly dependent on the automotive market, which is changing as cars are becoming connected, capable of accessing other services over the internet. Sirius isn’t just lacking an internet strategy, the company also doesn’t have a real answer to the growing popularity of on-demand streaming services like Apple Music and Spotify.”
“The Pandora investment represents a kind of long-term insurance policy for Sirius against these market shifts,” Variety said.
Pandora has initially focused on ad-supported streaming but recently launched a full on-demand service to compete with Apple Music and Spotify called Pandora Premium. It had 76.7 million active listeners at the end of the first quarter of 2017, down from 79.4 million a year ago.
With investors “skittish” about Pandora’s move into the paid business, Variety said, the Sirius investment “not only provides Pandora with a financial lifeline, it’s also a big vote of confidence that Pandora is on the right track.”
Pandora also announced Friday it would sell its Ticketfly business to Eventbrite for $200 million. “Pandora is now poised to advance to the next stage of the company’s lifecycle,” said Tim Leiweke, a member of the company’s board.