SiriusXM will acquire Pandora in an all-stock transaction valued at approximately $3.5 billion, the companies announced Monday morning.

According to the announcement, the deal will create the world’s largest audio entertainment company, with more than $7 billion in expected revenue in 2018. It also moves SiriusXM and its parent company, Liberty Media, aggressively into the streaming market.

In June of last year, after months of circling, SiriusXM struck a deal to invest $480 million Pandora. The cash purchase stock gave the satellite radio company a 19% stake in Pandora, and included a provision to curb SiriusXM’s ability to take over the entire company by limiting SiriusXM from acquiring more than 31.5% of Pandora without the approval of the Pandora board.

The transaction has been unanimously approved by both the independent directors of Pandora and by the board of directors of SiriusXM, Monday’s announcement stated.

In an interview at Goldman Sachs’ Communicopia conference earlier this month, Pandora CEO Roger Lynch gave no indication that the deal was in the works, saying only that since the purchase Liberty has been involved “on a board level and as an investor, they have not been involved at an operational level.”

“This strategic transaction builds on SiriusXM’s position as the leader in subscription radio and a critically-acclaimed curator of exclusive audio programming with the addition of the largest U.S. audio streaming platform. Pandora’s powerful music platform will enable SiriusXM to significantly expand its presence beyond vehicles into the home and other mobile areas. Following the completion of the transaction, there will be no immediate change in listener offerings.” Further details will be announced in a conference call Monday morning.

The combined company will drive long-term growth by:

Capitalizing on cross-promotion opportunities between SiriusXM’s base of more than 36 million subscribers across North America and 23 million-plus annual trial listeners and Pandora’s more than 70 million monthly active users, which represents the largest digital audio audience in the U.S.
Leveraging SiriusXM’s exclusive content and programming with Pandora’s ad-supported and subscription tiers to create unique audio packages, while also utilizing SiriusXM’s extensive automotive relationships to drive Pandora’s in-car distribution.
Continuing investments in content, technology, innovation, and expanded monetization opportunities through both ad-supported and subscription services in and out of the vehicle.
Supporting and strengthening Pandora’s highly relevant brand.
Creating a promotional platform for emerging and established artists, curated and personalized in ways to deliver the most compelling audio experience that connects artists to their fan bases, as well as new listeners.

Jim Meyer, Chief Executive Officer of SiriusXM, said, “We have long respected Pandora and their team for their popular consumer offering that has attracted a massive audience, and have been impressed by Pandora’s strategic progress and stronger execution. We believe there are significant opportunities to create value for both companies’ stockholders by combining our complementary businesses. The addition of Pandora diversifies SiriusXM’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. Through targeted investments, we see significant opportunities to drive innovation that will accelerate growth beyond what would be available to the separate companies, and does so in a way that also benefits consumers, artists, and the broader content communities. Together, we will deliver even more of the best content on radio to our passionate and loyal listeners, and attract new listeners, across our two platforms.”

Roger Lynch, Chief Executive Officer of Pandora, said, “We’ve made tremendous progress in our efforts to lead in digital audio. Together with SiriusXM, we’re even better positioned to take advantage of the huge opportunities we see in audio entertainment, including growing our advertising business and expanding our subscription offerings. The powerful combination of SiriusXM’s content, position in the car, and premium subscription products, along with the biggest audio streaming service in the U.S., will create the world’s largest audio entertainment company. This transaction will deliver significant value to our stockholders and will allow them to participate in upside, given SiriusXM’s strong brand, financial resources and track record delivering results.”

According to the announcement, the owners of the outstanding shares in Pandora that SiriusXM does not currently own will receive a fixed exchange ratio of 1.44 newly issued SiriusXM shares for each share of Pandora they hold. Based on the 30-day volume-weighted average price of $7.04 per share of SiriusXM common stock, the implied price of Pandora common stock is $10.14 per share, representing a premium of 13.8% over a 30-day volume-weighted average price. The transaction is expected to be tax-free to Pandora stockholders. SiriusXM currently owns convertible preferred stock in Pandora that represents a stake of approximately 15% on an as-converted basis.