Are Pandora Shareholders Getting Enough in the Buyout?

Pandora Media Inc. (NYSE: P) shares shot up early on Monday after it was announced that the company would be acquired by Sirius XM Holdings Inc. (NASDAQ: SIRI). The transaction is expected to close in the first quarter of 2019.

It’s worth pointing out that this merger agreement has a “go-shop” provision under which Pandora and its board of directors may actively solicit, receive, evaluate and potentially enter negotiations with parties that offer alternative proposals following the execution date of the definitive agreement.

As for the terms, this is an all-stock transaction valued at roughly $3.5 billion. Pandora shareholders will receive a fixed exchange ratio of 1.44 newly issued Sirius shares for each share of Pandora they hold. Based on the 30-day volume-weighted average price of $7.04 per share of Sirius common stock, the implied price of Pandora common stock is $10.14 per share, representing a premium of 13.8% over a 30-day volume-weighted average price.

Overall, this transaction builds on Sirius’s position as the leader in subscription radio and a critically acclaimed curator of exclusive audio programming with the addition of the largest U.S. audio streaming platform. Pandora’s music platform will enable Sirius to significantly expand its presence beyond vehicles into the home and other mobile areas. Following the completion of the transaction, there will be no immediate change in listener offerings.

Roger Lynch, CEO of Pandora, commented:

We’ve made tremendous progress in our efforts to lead in digital audio. Together with SiriusXM, we’re even better positioned to take advantage of the huge opportunities we see in audio entertainment, including growing our advertising business and expanding our subscription offerings. The powerful combination of SiriusXM’s content, position in the car, and premium subscription products, along with the biggest audio streaming service in the U.S., will create the world’s largest audio entertainment company. This transaction will deliver significant value to our stockholders and will allow them to participate in upside, given SiriusXM’s strong brand, financial resources and track record delivering results.

Shares of Pandora closed Friday at $9.09, with a consensus analyst price target of $9.20 and a 52-week trading range of $4.09 to $10.07. Following the announcement, the stock was up about 9% at $9.90 in early trading indications Monday.

Sirius closed Friday at $6.98 a share, in a 52-week range of $5.17 to $7.70 and with a consensus price target of $7.02. The stock was down about 4% at $6.72 in Monday’s premarket.

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