Billionaire George Soros’ big bet on streaming music reportedly has paid off with Sirius XM Holdings Inc.’s $3.5 billion deal to acquire Pandora Media Inc.
Satellite radio company Siriuson Monday said it will buy online music service Pandora in an all-stock deal that will help it battle growing competition from streaming rivals Spotify and Apple Music, Reuters explained.
Soros' hedge fund owned a $56 million stake in Pandora at the end of the second quarter on June 30.
"Even at the highest prices of the quarter ( $7.64 per share), Sirius XM's purchase of Pandora would represent at least a 30% premium on his investment, so long as he still holds the stock," Business Insider reported.
Sirius XM would give Pandora shareholders 1.44 new shares for every Pandora share they own, making his stake potentially worth $72.2 million in new shares, BI reported.
A "go shop" provision allows Pandora to seek a better offer, BI reported.
Sirius XM, controlled by media mogul John Malone’s Liberty Media Corp., has built a name supplying more than 175 channels to car drivers, but has largely trailed Pandora, Spotify Technology SA and Apple in mobile and streaming content.
Monday’s deal gives the pair a market value of about $34 billion, topping Spotify’s $31.2 billion and follows through on Sirius’ purchase of a 15 percent preferred-stock stake in Pandora for $480 million last year.
“We view the read through to Spotify as slightly negative as it could face a stronger competitor in the U.S. while at the same time one of the only large swaths of ad-supported listeners in the fast-maturing U.S. goes off the market,” SunTrust analyst Matthew Thornton said.
Meanwhile, the deal has initially struck a wrong note with investors, Bloomberg explained.
Sirius suffered its worst stock plunge in more than seven years on Monday after the satellite-radio broadcaster announced the acquisition, which would put the company in more direct competition with Spotify Technology SA (SPOT).
On a conference call with analysts, Pandora and Sirius offered little detail about how they would work together after the merger. Sirius Chief Executive Officer Jim Meyer spoke vaguely about “optimizing cross-promotion” between platforms. “My gut tells me -- that’s where I see the biggest opportunity,” he said.
Sirius is betting it can expand beyond an audience that mainly listens to satellite radio while driving. Sirius bought a stake in Pandora last year for $480 million, giving the online-radio company a lifeline after upstarts such as Spotify began luring away streaming-music subscribers.
The all-stock deal values Pandora at $10.14 a share. It’s 12 percent more than the closing price on Friday, but way below levels of four years ago -- before the stock tanked as competition from Spotify and Apple Music intensified. Matthew Thornton, an analyst at SunTrust Banks Inc., called the price “underwhelming.”
Malone has been working to build a radio empire, complementing the pay-TV assets that helped him build his fortune. Another of of the billionaire’s companies, Liberty Media, has expressed interest in acquiring IHeart Media Inc., the U.S. radio broadcaster that filed for bankruptcy earlier this year.
Monday on Wall Street, Sirius stock (SIRI) fell 10 percent to $6.26, the worst one-day performance since August 2011. Pandora shares (P) also declined, falling 1.2 percent to $8.98 in New York. Stock prices of both companies rebounded modestly Tuesday.
Sirius is buying a company that has recorded years of losses. Pandora’s shares fell for years in the face of competition from Spotify and other online services.
But a comeback has been in the works. Pandora introduced its own on-demand music service and brought in former Sling TV CEO Roger Lynch a year ago to work on a turnaround. At the end of the second quarter, the company had about 6 million paying customers. That’s helped the stock recover this year, gaining 89 percent through Friday’s close.
Pandora has introduced its own on-demand music service and brought in former Sling TV CEO Roger Lynch a year ago to work on a turnaround.
Sirius and Pandora said the transaction is expected to be completed in the first quarter of next year. The deal allows Pandora to look around for better offers. If Pandora takes a superior proposal from another acquirer, the company would owe Sirius a $52.5 million breakup fee. If the deal fails for other reasons, the breakup fee is $105 million.
Material from Bloomberg and Reuters has been used in this report.
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