In an effort to expand itself beyond car radios, SiriusXM says it's buying music streaming service Pandora Media Inc. for $3.5 billion. The stock deal will allow the subscription radio company to expand beyond cars and into home and other mobile areas.
According to The Associated Press, SiriusXM Holdings Inc. has more than 36 million subscribers in North America while Pandora boasts more than 70 million monthly active users.
Pandora stockholders will receive 1.44 newly issued SiriusXM shares for each Pandora share they own. Pandora has a "go-shop" period in which it can solicit other offers from third parties.
The deal, which has been approved by both companies' boards, is expected to close in the first quarter of 2019. It still needs approval from Pandora shareholders.
Shares of Pandora, based in Oakland, California, jumped more than 8 percent in Monday premarket trading, the AP reports, while SiriusXM's stock declined 4 percent.
Pandora, which was founded in 2000, faces competition from other streaming companies like Spotify, Apple, Amazon and Jay-Z's Tidal.
SiriusXM, which was formed with the merger of Sirius and XM satellite radio services in 2008, had already invested $480 million to buy 19 percent of Pandora's stock last year, CNN Money reports; it was widely reported that the company was looking into a full purchase.
In the $480 million investment, SiriusXM appointed three executives to Pandora's board, with one serving as chairman. A few weeks after the deal was announced, Pandora co-founder and CEO Tim Westergren stepped down from the company.
"We believe there are significant opportunities to create value for both companies' stockholders by combining our complementary businesses," SiriusXM CEO Jim Meyer said in a statement Monday morning.
Meyer added that the merger would create "the world's largest audio entertainment company."
"This is the worst-kept secret of a courtship that's gone on for several years," Meyer said. "I've been in conversations with Pandora before Roger [Lynch, CEO] was there and certainly after Roger's been there. We had a conversation 15 months ago and couldn't reach an agreement on value, quite honestly ... when we took that position, I assure you, there was no guarantee that any further transaction would get done or that we would end up where we've ended up today. What's changed is my confidence in Pandora as an asset, and that confidence is a result of the progress I've seen in the last 12 months."
The companies say users shouldn't expect any immediate changes and that Pandora will continue to operate as a separate service.