Pandora gets $150 million infusion

Bloomberg

Pandora Media Inc., struggling with widening losses and a tepid outlook for its online music business, is shaking up its board and stepping up efforts to find a possible buyer.
The Oakland, California-based company said in a statement it received a $150 million infusion from KKR & Co., the private-equity firm. Two directors will leave and Pandora will create a new independent board committee that plans to seek new members. Richard Sarnoff, who oversees KKR’s media and communications holdings in the Americas, will join the board as well.
The fast growth of Spotify and Apple Music, along with the billions of dollars Amazon and Google are investing in music, have pressured Pandora to expand beyond its roots as an internet radio company and become a streaming service seeking paying subscribers. It also has gone into ticketing and artist services. Investors such as the hedge fund Corvex Management LP are questioning that strategy and urging a possible sale because of losses and a tumbling stock price.
“Their balance sheet was deteriorating and they were at risk,” said Rich Greenfield, an analyst at BTIG LLC. Pandora has said it can add customers because the market for paid streaming is still in its infancy.
Yet more than 100 million people around the world are already paying for a music service of some kind, including more than 20 million people in Pandora’s home market. The company held out the possibility it could find a buyer in the 30 days before the KKR investment closes.
Pandora introduced its paid service later than expected and won’t generate significant revenue from subscribers until the second half of the year, Chief Financial Officer Naveen Chopra said on a call with investors.
The company’s cash and short-term investments have dwindled to a little over $200 million from $382 million two years ago because of acquisitions and ongoing losses, and Pandora faced looming payments to major record labels that could have triggered a crisis, according to Greenfield. The company declined to comment.
Under the agreement, KKR will purchase $150 million in a newly designated Series A convertible preferred stock.
The stock will yield at least 7.5 percent and is convertible into common stock at $13.50 a share. Pandora also has the option to increase the investment to a total of $250 million.