The deal, which includes a "go-shop" provision that allows Pandora to seek a better offer, will pay current Pandora shareholders 1.44 newly-issued Sirius XM shares for every share they own. The implied price of $10.14 a share is a 13.8% premium to Pandora's 30-day volume-weighted average price.
"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," Sirius XM CEO Jim Meyer said in the release.
"We believe there are significant opportunities to create value for both companies' stockholders by combining our complementary businesses. 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."
Alongside the announcement, Sirius XM reiterated its full-year 2018 outlook and Pandora reiterated its third-quarter outlook.
Pandora shares are up more than 9% on the news, trading just below $10. Meanwhile, Sirius XM's stock is down about 2% at $6.84 a share. The deal could also be a windfall for hedge fund billionaire George Soros, who made a $56 billion bet on Pandora in the second-quarter, regulatory filings show.