Sirius XM negotiating PIPE deal with Pandora Media

If the deal goes through, it could potentially be a win-win situation for both companies, given their common target audience.

As per sources familiar with the matter at hand, Sirius XM Holdings Inc, a U.S. satellite radio company is looking to invest in internet music service provider, Pandora Media Inc.

Sirius XM is controlled by John Malone’s Liberty Media Corp.

After its acquisition talks with Pandora came to naught, Sirius XM is trying to negotiating a Private Investment in Public Equity (PIPE) in the company, said sources, on Wednesday.

If the negotiations between the two come to fruition, the deal would marks the second time Pandora allows third party investments in the company. Last month private equity firm KKR & Co LP invested $150 million in Pandora.

KKR’s deal gave Pandora a 30-day-period to look for an alternate deal, which is set to expire on Thursday. This is why Sirius XM is racing to beat the deadline and clinch its own investment with Pandora, revealed sources.

The terms of Sirius XM’s proposed PIPE investments in Pandora are still unknown, negotiations are yet to be completed, and Liberty Media could potentially object to the deal could still fall apart, cautioned sources.

Sources have preferred the cover of anonymity since the deliberations are ongoing and are thus confidential.

While Liberty Media and Sirius XM did not immediately respond to requests for comment, Pandora declined to comment.

Given their common target audience, a partnership between Pandora and Sirius XM is likely to benefit both companies.

Case in point: while Sirius XM is looking to expand its foothold on the mobile scene and on the internet, Pandora is looking to become more popular with drivers who typically subscribe to Sirius XM.

A PIPE deal involves the sale of a company’s shares in a private offering, as opposed to a public secondary offering.

On Wednesday, the shares prices of Pandora ended at $8.48, thus giving the company a market capitalization of around $2 billion. The company’s stock however is down by 30% in the last one year. It is facing serious competition from Google Play Music, Apple Music, Spotify and Amazon.com Inc’s Music Unlimited.

KKR’s $150 million investment gives it a preferred stock option which can be converted into common stock, cash, or a combination, at a conversion price of $13.50 per share.

Incidentally, Pandora had come under pressure from activist hedge fund, Corvex Management LP, run by Keith Meister, a protégé of Carl Icahn, to explore the possibility of selling itself.

Corvex owned 8.6% of Pandora as of March 31 2017.

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