The deal is structured by a subsidiary of SiriusXM purchasing an aggregate of $480 million in newly issued Series A convertible preferred stock.
SiriusXM will purchase $172.5 million of Series A preferred stock upon execution of the agreement and has agreed to purchase the rest at a second closing – with a deadline which effectively closes on February 1 next year.
The Series A preferred stock represents a stake of 19% of Pandora’s currently outstanding common stock and a 16% stake on an as-converted basis.
The Series A preferred stock is convertible into common stock at a purchase price of $10.50 per share. The conversion price of the Series A preferred stock is approximately a 14.2% premium to Pandora’s stock price average across the 20-day period preceding June 9, 2017.
Jim Meyer, Chief Executive Officer of SiriusXM, said, “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.
“Pandora’s large user base and its ability to provide listeners with a personalized music experience are tremendous assets. With its strong technology and new product offerings, we believe there are exciting opportunities for Pandora to accelerate its growth and increase value for Pandora and SiriusXM stockholders.”
“Pandora’s large user base and its ability to provide listeners with a personalized music experience are tremendous assets.”
Jim Meyer, SiriusXM
“Liberty Media has long recognized the strength of the Pandora brand and the opportunities in the ad-supported digital radio market,” said Greg Maffei, Chairman of the SiriusXM Board of Directors and Chief Executive Officer of Liberty Media Corporation. “We are very supportive of SiriusXM’s strategic investment.”
When the transaction closes, three individuals designated by SiriusXM will be named to the Pandora Board of Directors.
One of those individuals will serve as Chairman and SiriusXM designated directors will serve as select Board committee representatives. With these appointments, the Pandora Board will be expanded to consist of nine directors.
“Pandora’s Board and management team are committed to driving stockholder value and have carefully evaluated alternative strategies as part of the process disclosed on May 8,” said Tim Leiweke, member of Pandora’s Board of Directors.
“We are pleased that the conclusion of that process resulted in a major investment by SiriusXM. With this investment, we have the backing of one of the media industry’s most successful investors and significant capital to accelerate growth. Pandora is now poised to advance to the next stage of the company’s lifecycle. Lastly, this transaction ensures that Pandora stockholders get the benefit of additional capital from an important strategic investor who can help enhance stockholder value.”
“The investment from SiriusXM infuses resources to help Pandora continue to grow and innovate,” said Pandora CEO and founder Tim Westergren. “With the strategic review behind us, and a strong balance sheet, we look forward to focusing on business execution and the optimization of our strategy.”
In connection with the transaction, Pandora agreed with an affiliate of Kohlberg Kravis & Roberts to terminate their Investment Agreement announced on May 8, 2017, and pay KKR a termination fee of $22.5 million.
SiriusXM will be subject to certain standstill restrictions, including, among other things, that it will be restricted from acquiring additional securities of Pandora for 18 months.
After that period and for so long as a director designated by it is serving on the Board of Directors, SiriusXM has agreed not to acquire more than 31.5% of Pandora’s equity securities without the approval of Pandora’s Board of Directors.
The second closing contemplated by the agreement is subject to customary closing conditions, including antitrust approval, and is expected to close by the fourth quarter.Music Business Worldwide