The deal was structured by a subsidiary of SiriusXM purchasing an aggregate of $480 million in Series A convertible preferred stock, representing a stake of approximately 15% on an as-converted basis.
SiriusXM has 36 million subscribers across North America and more than 23 million trial listeners, the company said in a statement. But it also appeared to leave open the possibility of a shift, saying there would be "no immediate change in listener offerings".
But SiriusXM says "unique audio packages" are also in the pipeline, somehow combining the parent company's "exclusive content and programming" with the daughter's ad-supported and subscription tiers to, well, milk more money from more users.
A big idea behind the merger is that SiriusXM and Pandora target complementary audiences.
A pioneer of the Internet radio market, Pandora couldn't fend off the likes of Spotify and Apple Music in recent years, merely releasing a direct rival for the two hugely popular music streaming services in 2017.
Continuing investments in content, technology, innovation, and expanded monetization opportunities through both ad-supported and subscription services in and out of the vehicle.
Meanwhile, the deal will help SiriusXM tap into Pandora's mobile strength while giving it the chance to improve in areas such as making personalized listening recommendations.
Pandora shares rose 9.5 percent to $9.95 in early USA trading.
The proposed deal is expected to close in the first quarter of next year, Pandora said, and must first win the approval of Pandora stockholders.
SiriusXM stock was slightly lower in premarket trading following the announcement. Pandora has a "go-shop" period in which it can solicit other offers from third parties. Such a caveat allows Pandora's board to follow its fiduciary duty to shareholders by seeking competing offers.