Macquarie analyst Amy Yong raised her price target on Sirius (SIRI) to $5 from $4.85 and maintained her Outperform rating. The analyst believes SIRI is attractive regardless of whether the company pursues an acquisition of Pandora Media (P). According to the flyonthewall, the analyst noted a deal with Pandora could help refresh the SIRI story. The article went on to note the analyst is assuming a $15 offer for Pandora it would dilute SIRI 2017 free cash flow by about 3%. Additionally, it was noted SIRI balance sheet could handle doing an all cash or mostly cash deal. The analyst finally noted a deal between the two companies could help SIRI's digital strategy.
It was just January 6th that a Bloomberg reported that Sirius CFO, David Frear said that a deal with Pandora is not very likely. Additionally, it was reported that the CFO wasn't sure about the cross-selling opportunities that existed. (See: Did Sirius Kill Hopes for a Deal With Pandora?)
Both SIRI a P are down about one percent on the day trading around $4.60 and $11.85 respectively. Shares of Pandora have been hit the hardest since the CFO comments on January 6th. Shares have fallen from $13, a decline of about 8%.
Using Marketwatch and reviewing the balance sheet for SIRI, think it might be more challenging for SIRI to do an all-cash deal for P. Pandora's market cap is currently about $3 billion. At $15 per share, P would have a market cap of nearly $3.5. Siri has cash of about $575 million and total current assets of only $1 billion. Additionally, the company has total liabilities of nearly $9 billion, with total long-term debt of nearly $6 billion. It is my opinion, that the only likely way, a deal could get done, is through the issuance of new long-term debt, to raise the cash. Or perhaps using SIRI current stock valuation as a currency to get a deal completed.
We are a long way away from having to worry about how a deal would be structured from the sounds of the SIRI CFO last week.