Pandora looking for a buyer after $150m investment

Pandora is looking at the possibility of acquiring a new owner after securing fresh investment of US$150 million from private equity giant KKR.

Its chairman of the board, Jim Feuille, has stepped down, saying, “Having secured a significant financial commitment from KKR to strengthen the company’s balance sheet, we have positioned the company to evaluate any potential strategic alternatives, including a sale, in the 30 days before the financing is set to close.”

Looking at these options will be former AEG CEO Tim Leiweke.

The Oakland, California-based Pandora is under pressure from its shareholders to find a buyer. Speculation has Liberty Media’s SiriusXM as the strongest contender.

While streaming has been the saviour of the music industry, not so for Pandora. The online radio station turned streaming service has lost active users to the likes of Spotify, Apple Music and Deezer – now 76.7 million from 79.4 million from last year, according to figures released earlier this week.

But at the same time its first quarter of revenue for 2017 was up 6.3% year on year to $316 million, attributed to the launch of Pandora Premium.

“Although it remains early days, we are enthusiastic about the recent launch of Pandora Premium,” Pandora’s founder and CEO Tim Westergren said, adding that the results were “consistent with our expectations”.

Net loss in this period was $115.1 million was down from the $132.3 million posted in Q1 2016. Cash in bank is now $203 million at the end of the first quarter, from $243 million in January 2017 and $383 million a year ago.

It’s looking at cutting 7% of its global workforce.

The number of subscribers rose 20% from last year to 4.71 million. This is below Spotify’s achievement of 50 million users, but Pandora is only available in Australia, New Zealand and the United States.

Both Pandora and KKR say that the $150 million injection are designed for long-term growth. KKR may increase its investment to $250 million if the need arises.

“A strong balance sheet gives us the ability to accelerate growth investments when appropriate and to compete aggressively in a rapidly changing, complex market,” said Pandora’s Chief Financial Officer Naveen Chopra.

Richard Sarnoff, who oversees KKR’s media and communications holdings in the Americas, will join the board.

He says, “A true pioneer in digital music, we believe that Pandora is uniquely positioned over the long term given the sheer size of its user base, the quality of its new subscription services and the fact that it has created one of the few scaled streaming media businesses in the US.

“The launch of Pandora Premium is yet another example of innovation at a company that created the modern-day music recommendation engine. And we believe that the next few years should be transformational for the company.”

Aside from Feuille, Peter Gotcher is also leaving the Pandora board. New members will be appointed who can provide expertise and leadership as Pandora moves forward.