Pandora just bought itself a little more time: The music streaming service negotiated a brief extension of the pre-closing period for a looming $150 million investment from private equity fund KKR. This will allow the company “to explore interest expressed by a strategic investor in making a substantial minority investment in Pandora,” as it put it in a statement Thursday morning. Pandora didn’t mention the potential investor, but multiple reports point to Sirius XM.
Pandora had been under a time crunch ever since it negotiated the KKR investment a month ago; the terms of that agreement gave the company 30 days to instead find an acquirer. Sirius XM was said to be the only company interested in such a deal. However, Sirius XM CFO David Frear threw cold water on any acquisition rumors in recent days, telling investors last week that any chatter about acquisitions was “not very likely.”
Now, it looks like Sirius may be Pandora’s white knight after all, albeit without an outright acquisition. Reuters and CNBC reported Thursday that Sirius was exploring a private equity investment in Pandora. There’s no word on how much Sirius is looking to invest, but it’s likely that the investment would at least come close to, or match, KKR’s commitment. Pandora will have to pay KKR $15 million if the deal between the two companies falls apart.
An investment by Sirius XM wouldn’t just throw Pandora a lifeline as it transitions from a primarily ad-based business to one that also puts a significant emphasis on subscriptions, it would also offer Sirius a chance to participate in the growing on-demand music subscription market. Investors seemed cautiously optimistic about the pairing, halting a slide of Pandora’s stock as they waited for further news.