SiriusXM Acquires Pandora for $3.5 Billion

SiriusXM eyes the acquisition of Pandora, which would emerge as a highly beneficial deal for both of the companies. How can this move affect the values of companies’ shares?

25 September 2018 – The satellite radio provider SiriusXM stated this Monday that it looks into acquiring the music streaming service Pandora Media for $3.5 billion. The company is planning to retain clients, who are not willing to pay for premium channels as a result of the deal. 

SiriusXM Plans Acquisition of Pandora Media

It is reported that Pandora has struggled to compete with its competitors in the recent years. Some of its rivals, such as Apple Music and Spotify, were able to offer paid on-demand content, thus dominating the market. 

SiriusXM is one of the first commercial enterprises, which sells the radio service via satellite systems. Online reports note that the company has experienced losses due to the high capital costs of its business. Therefore, the deal of acquiring Pandora seems like a good option for both the parties. 

Acquiring Pandora would provide SiriusXM with an access to the fast-evolving online segment of listeners. Those listeners usually prefer to streamline music via their mobile phones. In fact, there are much fewer people that listen to traditional programming, both over terrestrial or satellite radio.

SiriusXM’s Chief Executive, Jim Meyer, stated that the acquisition would enable Sirius to retain listeners, who did not want to pay for music by diverting them toward Pandora’s free ad-based model. He has been quoted as saying:

 “The truth is the majority of ‘trial-ers’ ultimately decide not to pay for our service. As I’ve said many times, we would benefit from having a free funnel.”

How SiriusXM Acquisition Affects Pandora’s Share Value?

SiriusXM enjoys 36 million subscribers in North America and more than 23 million trial listeners. The companies stated that along with the 70 million monthly active listeners on Pandora, this acquisition would potentially create the largest digital audio audience in the US.

The $3.5 billion offer comes in just the right time for Pandora, as the company is anticipated to post losses of $150 million this year and about $83 million next year. In addition, Pandora stands to greatly benefit from the potential introduction of the Music Modernization Act that is aiming to address the loopholes that have led musicians to complain about unfair compensation from streamlining services. 

It is also reported that SiriusXM’s Pandora acquisition enables potential bidders to appear in a go-shop period when the company is still able to attract other buyers. Competitors could emerge with a spoiler bid, but industry insiders expect SiriusXM to close the deal.

SiriusXM is controlled by Liberty Media. It informed the public that it plans to buy Pandora in an all-stock transaction. Reportedly, shares of Pandora skyrocketed in early Monday trading only to end their day 1 percent down.

After the acquisition by SiriusXM, the Pandora stock at NYSE dropped from yesterday’s highs of $9.71 to $8.99 levels. Considering the bearish move, the stock is still trading above the strong daily support zone near $8.61 levels. Breaking below the support might dip the prices to lower level i.e. near the $8.2- $8.00 levels. Overall the technical isn’t supporting the stock on the daily charts. Thus, a bearish movement could be seen in coming days.

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