Pandora is taking a cash infusion to maintain “a strong balance sheet” as it struggles to shift from radio to the increasingly popular on-demand streaming model. Private equity firm KKR has agreed to buy $150 million in Series A preferred Pandora shares and be paid a 7.5% to 8% quarterly dividend, and KKR’s Richard Sarnoff will take a board seat.
Here are the nuts and bolts of the deal:
“KKR will purchase an aggregate of $150 million in a new designated Series A convertible preferred stock of Pandora. Pandora will pay dividends to the holders of the preferred stock quarterly at an annualized rate of 7.5% if paid in cash or 8% if paid in kind, at its option. The Series A preferred stock is convertible into common stock, cash or a combination thereof at a conversion price of $13.50 per share. The offering may be upsized to a total of $250 million should the Company determine to issue additional shares.”
Pandora bought the remains of failed on-demand streaming app Rdio back in 2015 for $75 million cash. But it took the company a year and a half to build that foundation into Pandora Premium, which launched in March. With a focus on simplicity, Pandora hopes to compete with Spotify, Apple Music, and other streaming services. But its late start mean it may need the extra cash to build out more attractive features and do heavy marketing to change what people think of when they hear Pandora.