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SiriusXM to buy Pandora in $3.5B deal that could unlock your car for streaming

Pandora is staying the same, for now.

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Pandora will be acquired by SiriusXM for $3.5 billion.

Pandora

SiriusXM is taking over Pandora in a deal that values the vanguard music streaming service at $3.5 billion in stock and will fuse the world's dominant satellite radio company with an online music mainstay. 

Neither Pandora nor SiriusXM will be changing their services initially, the companies said Monday. The main change you'll notice is potentially hearing promos for SiriusXM on Pandora, and vice versa. 

But this deal could be transformative for both companies, each of which has weaknesses that the other could shore up. SiriusXM has fallen behind in technological skills, like personalized recommendations and mobile listening. Meanwhile, SiriusXM unlocks one of the final frontiers for internet-based music -- the automobile -- just as Pandora's growth has struggled to keep up with that of Spotify and Apple Music.

Because connectivity has been so challenging to get directly into cars, no streaming music service has been able to establish dominance in automobiles in the same way SiriusXM has as a satellite radio company. Pandora coming on board means both may be better armed when the battle over who rules music listening really hits the road.  

The companies said Monday that they'll take advantage of SiriusXM's relationships with automakers to enhance Pandora's distribution in cars.

Pandora was one of the first music services to become a hit, catching on as smartphones and mobile internet connections were making streaming tunes accessible for millions. But its early success had big downsides. Pandora built up bad blood with the music industry, and Pandora's digital-radio format locked it into rigid rules about what you could and couldn't hear. Younger competitors like Spotify were able to swoop in, score more flexible license deals and put out next-generation streaming-music services that Pandora had trouble matching. Pandora's growth slowed, the kryptonite of tech companies.

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Pandora's technological capabilities would help SiriusXM expand beyond vehicles into the home and onto mobile devices, the companies added. SiriusXM will be "leveraging" some of its exclusive programming onto Pandora's services to "create unique audio packages," the companies said. SiriusXM is home to personalities including Howard Stern. 

One glaring gap in this takeover: Neither Pandora or SiriusXM can help the other expand internationally. Pandora has more than 70 million monthly active users, almost all of them in the US. Pandora is still the most listened-to streaming music service in the US, but competitors like Spotify are bigger globally. SiriusXM has more than 36 million US subscribers and 23 million annual trial listeners.

SiriusXM had already invested $480 million last year in Pandora Media, a deal that gave SirusXM a minority stake and seats on Pandora's board.

Pandora shares were up 5.2 percent to $9.56 a share in trading early Monday. Sirius stock fell 5.2 percent to $6.62 a share. Their deal, which will dilute the value of SiriusXM's stock, values Pandora shares at $10.14 each. Pandora investors will receive 1.44 new SiriusXM shares for each share of Pandora they hold. 

They expect the deal to close early next year, subject to approval by Pandora stockholders and following a "go-shop" period, when competiting offers are allowed to come onto the table. 

Originally published at 4:54 a.m. PT. 
Updated at 7:15 am PT: With additional details and context. 

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