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Pandora Media Inc. (NYSE: P) shares saw a handy gain on Friday after the company announced that Sirius XM Holdings Inc. (NASDAQ: SIRI) would be making a $480 million strategic cash investment in it. The capital provided through this investment will allow Pandora to make targeted investments and capitalize on opportunities to build on its position in the streaming radio business.

Under the terms of the agreement, a subsidiary of Sirius will purchase an aggregate of $480 million in newly issued Series A convertible preferred stock of Pandora. Sirius purchased $172.5 million of Series A preferred stock upon execution of the agreement and has agreed to purchase the balance of the Series A preferred stock at a second closing.

The Series A preferred stock will represent a stake of 19% of Pandora’s currently outstanding common stock and a 16% stake on an as-converted basis.

At the same time, three individuals designated by Sirius will be named to the Pandora board of directors. One of those individuals will serve as chairman, and Sirius-designated directors will serve as select board committee representatives.

Jim Meyer, CEO of Sirius, commented:

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.

Shares of Pandora were last seen up about 4% at $8.75 on Friday, with a consensus analyst price target of $13.02 and a 52-week trading range of $8.14 to $14.98.

Sirius shares were trading down 1% at $5.35. The 52-week range is $3.74 to $5.53, and the consensus price target is $5.21.