A trio of Am Law 100 firms are advising on a deal announced Monday that will see Sirius XM Holdings Inc. acquire streaming radio service Pandora Media Inc. The combination, if completed, will create the world’s largest audio entertainment company.
Baker Botts and Simpson Thacher & Bartlett have taken the lead on the proposed deal for Sirius XM, which is seeking to buy the rest of Pandora in an all-stock transaction valued at $3.5 billion. The satellite radio giant had already purchased a 19 percent stake in Pandora last year in a separate $480 million deal. Sirius XM’s interest in investing in Pandora comes as the latter copes with competition from other streaming music services, such as Apple Music LLC and Spotify Technology SA, the latter of which went public earlier this year.
Pandora, which claims to have 70 million monthly active users, turned to Sidley Austin and Wachtell, Lipton, Rosen & Katz last year for outside counsel on the initial investment a year ago this month from Sirius XM, which was advised on that matter by Jones Day and Simpson Thacher. This time around, Sidley took the lead for Oakland, California-based Pandora.
Martin Wellington, managing partner of Sidley’s office in Palo Alto, California, and a member of the firm’s M&A, private equity, capital markets and emerging companies and venture capital teams, is leading a team of lawyers advising Pandora on the deal. Wellington is working on the matter with Sidley M&A partners Jennifer Fitchen and Ruchun Ji, both of whom are based in Palo Alto.
Sidley’s Silicon Valley base has expanded in recent years with the addition of Fitchen, who joined the firm from Cooley in early 2015, and Ji, who came aboard from O’Melveny & Myers later that same year.
Wellington also joined Sidley in 2015 from Davis Polk & Wardwell, where he took the lead for Pandora on an initial public offering that raised $235 million in 2011. Securities filings show that the listing yielded roughly $1.55 million in legal fees and expenses for Davis Polk.
Pandora’s sale to Sirius XM is expected to close in the first quarter of 2019. Following the completion of the deal, Sirius XM said it intends to maintain the Pandora service and brand. Stephen Bené, a former in-house legal chief at video game maker Electronic Arts Inc., has served as general counsel at Pandora since 2014.
New York-based Sirius XM, which has 36 million paying subscribers in North America, as well as 23 million more annual trial listeners, expects to realize some $7 billion in projected revenue with an enterprise valuation of $41 billion as a result of its acquisition of Pandora. The proposed combination requires antitrust approval.
The Simpson Thacher team advising Sirius XM on the deal is being led by M&A partners Eric Swedenburg and Ravi Purushotham. Other lawyers from the firm working on the matter include executive compensation and employee benefits partner Gregory Grogan, tax partners Robert Holo and Marcy Geller, intellectual property partner Lori Lesser, capital markets partner Andrew Keller and counsel Lia Toback, credit partner Brian Steinhardt and associates Monisha Bhayana, Luiz “Tuca” Bihari, Genevieve Dorment, Johanna “Joey” Mayer, Christopher “C.J.” Murray, Sophie Staples and Michael Vernace.
Patrick Donnelly, a former Simpson Thacher associate, serves as general counsel for Sirius XM. Dara Altman, a former associate at Willkie Farr & Gallagher, is an executive vice president and chief administrative officer at the company. Sirius XM was created in 2007 via a $13 billion merger of equals between Sirius and XM Satellite Radio. The combined company nearly went bankrupt in 2009, only to be saved by an investment from Liberty Media Corp. The latter, which now controls Sirius XM, turned to Baker Botts in 2014 to advise on its acquisition of a 48 percent stake in the company.
Renee Wilm, head of the New York corporate practice at Baker Botts, is working with senior associate Brittany Uthoff, tax partner Tamar Stanley, employee benefits and compensation partner J. Rob Fowler and antitrust partners Paul Cuomo and Stephen Weissman in advising Liberty Media and Sirius XM on their Pandora acquisition.
“We believe there are significant opportunities to create value for both companies’ stockholders by combining our complementary businesses,“ said a statement from Sirius XM CEO James Meyer announcing the deal. “The addition of Pandora diversifies Sirius XM’s revenue streams with the U.S.’s largest ad-supported audio offering, broadens our technical capabilities and represents an exciting next step in our efforts to expand our reach out of the car even further.”
Pandora, whose shares closed at $9.09 on Sept. 21, saw its stock rise as much as 10 percent following Monday’s announcement. It has since then drop down to about $9 per share. Sirius XM’s stock, however, fell drastically after the news. The company’s shares dropped more than 10 percent Monday, closing at $6.26.