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SiriusXM And Pandora Reportedly In Talks; SunTrust Considers Potential Deal

SiriusXM And Pandora Reportedly In Talks; SunTrust Considers Potential Deal

Shares of Pandora Media Inc (NYSE: P) were trading higher by more than 6 percent Thursday morning after the company was named as a potential acquisition target.

The New York Post reported after Wednesday's market close that Sirius XM Holdings Inc. (NASDAQ: SIRI) is in talks to acquire Pandora. A CNBC report on Thursday added to the speculation and reported that talks between Sirius XM and Pandora have been on-and-off for months.

Investors shouldn't necessarily be surprised by the M&A chatter. Pandora closed a $150 million investment from the private equity firm KKR in early May, which led many to believe that a sale of itself is near.

SunTrust: Pandora Is A 'Motivated' Seller, But Don't Expect A Hefty Premium

Matthew Thornton of SunTrust Robinson Humphrey argued in a research report that the streaming music provider is a "motivated seller," but that doesn't mean it can negotiate from a position of strength.

The analyst thinks Pandora could be worth at least $9–$12 per share in an M&A scenario. As such, any finalized deal implies a loss of around 4 percent and upside of 24 percent with a 10 percent premium at the midpoint.

Moreover, Sirius chairman Greg Maffei was quoted by the New York Post as saying in the past that Pandora's business is only worth $10 per share, although he may have also offered $15 per share to acquire Pandora last July.

Aside from Sirius, the analyst thinks Tencent, Spotify, and Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) as other potential suitors.

Bottom line, Thorton maintains a Buy rating on "elevated prospects for M&A" but with a price target lowered from $16 to $10.50 to reflect a weighted average of a sale and no-sale valuation models.

Related Links:

Has The Pandora Thesis Changed In Light Of KKR Investment?

Statistics Show Music Streaming Is Now Too Big To Fail...For The Music Industry

Latest Ratings for SIRI

Oct 2020RBC CapitalUpgradesSector PerformOutperform
Oct 2020BenchmarkMaintainsBuy
Oct 2020Credit SuisseUpgradesNeutralOutperform

View More Analyst Ratings for SIRI
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