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Why Sirius XM Is Buying Pandora

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Sirius XM is acquiring Pandora

Sirius (SIRI) has agreed to buy music streaming company Pandora (P) in a deal valued at ~$3.5 billion in an all-stock deal. The subscription radio company invested $480 million in Pandora last year, giving it a 15% stake in Pandora.

The music streaming market has taken off in recent years. The deal comes as both companies face intense competition from leaders Spotify (SPOT) and Apple Music.

Pandora has 71 million active monthly listeners but only 6.2 million paid subscribers. Spotify has 83 million paid subscribers, and Apple Music has 50 million.

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Pandora’s acquisition will give Sirius XM a diversified subscriber base

Sirius’s acquisition of Pandora will help Sirius diversify its user base. Currently, the satellite radio company’s subscribers mostly listen to the programs while driving.

According to the deal, Sirius XM has agreed to pay the equivalent of $10.14 per share for Pandora. The companies expect the deal to be completed early next year.

Sirius stock fell 9% after the deal was announced on September 24, while Pandora stock initially rose 10% and then declined 1.1% that same day.

Pandora stock has nearly doubled so far in 2018 after it beat expectations in the last two quarters. Setbacks last year had caused the stock to plunge.

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