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Pandora knocked back bid from Sirius and Live Nation shareholder Liberty Media

By | Published on Friday 22 July 2016


US media company Liberty made an offer to buy Pandora earlier this year, according to the Wall Street Journal, but the proposal was rejected by the board at the American personalised radio service, seemingly on the basis of the price per share being offered.

There has been much speculation in the last year or so, of course, about publicly listed Pandora being bought by a tech or media giant. Though when co-founder Tim Westergren returned to the CEO role after the sudden departure of former boss Brian McAndrews in March, he heavily implied that seeking a buyer for the firm was no longer on the agenda.

That led to one shareholder in the loss-making company, Corvex Management, which controls nearly 10% of the firm’s stock, calling on Pandora management “to immediately engage an independent investment bank with a fresh perspective and without any prior history of advising the company to advise on a value maximisation process – including the execution of a sales process – and to evaluate the results against other options”.

According to the WSJ, although Liberty Media CEO Greg Maffei has been disparaging about the streaming music market in the relatively recent past – seeming to say that the high content costs make the streaming business unattractive – the media chief nevertheless expressed an interest in buying Pandora Media Inc for about $15 a share.

That would constitute a per-share premium of a few dollars – Pandora’s share price having never really recovered from a slump late last year – and would value the company overall at $3.4 billion. But sources tell the Journal that Pandora chiefs reckoned their company is actually worth something more in line with the share price before that aforementioned 2015 slump, which would be something more in the region of $20 a share.

The speedy rejection of Maffei’s bid may have also been influenced by the fact it seemed a highly speculative offer, rather than a serious takeover proposal. Though the Liberty chief, when asked in an investor meeting last month about why talks with the streaming firm were not progressing, apparently said “you’d have to ask the Pandora board”.

Any talk of Liberty acquiring Pandora inevitably leads to speculation of some kind of merger between the streaming service and satellite radio firm Sirius XM, in which Liberty has a 64% stake. And indeed, talk of a Pandora acquisition at the aforementioned Liberty investor meeting was framed in terms of the potential benefits of a Sirius/Pandora alliance.

Sirius knows that the growth of subscription streaming is a threat – especially as digital services become increasingly available in the car – and its own dabblings in the streaming domain have been somewhat lacklustre to date. Though at the same time, the royalties that Sirius, as a radio service, has to pay to the music rights owners are significantly lower than those paid by streaming services like Pandora. Therefore, while a shift into streaming may be necessary to stay competitive, for the time being Sirius would much prefer listeners to be tuning in to its radio channels.

There is also the issue that Pandora’s current ambitions are for global expansion and diversification into ticketing, which doesn’t tally so much with the business priorities of Sirius. Indeed, an alliance between Pandora and another business in which Liberty has a significant stake – Live Nation – would possibly make more sense, especially given the streaming service’s current plan to use its user data and direct-to-fan channels to sell gigs.

Live Nation, which already has an association with Tidal via its business partnership with Jay-Z, would potentially make a good strategic partner to anyone looking to turn a streaming service into a ticketing and direct-to-fan platform with multiple revenue streams.

And with Pandora admitting in a quarterly report this week that recent revenues were less than anticipated and user numbers were down over a million in the face of heightened competition from the likes of Apple Music, the company could possibly use a good strategic partner right about now. Perhaps $15 a share doesn’t look so bad after all.