Pandora now open to a SiriusXM takeover after rejecting offer in July

Pandora open to engaging in talks with Sirius XM: Sources
Pandora open to engaging in talks with Sirius XM: Sources

Pandora may be changing its tune.

The music streaming service is now open to selling itself and is now willing to engage with one-time suitor SiriusXM specifically, people familiar with the matter told CNBC. SiriusXM is expected to pursue a deal, the people said.

One person referred to the situation as being "the first inning of the process," and there is no assurance that Pandora will reach a deal with SiriusXM or other potentially-interested parties.

Shares of Pandora surged 16 percent Friday, while Class A shares of Liberty Media, the majority owner of SiriusXM, gained 0.89 percent. Sirius XM Holdings fell more than 5 percent.

Pandora's board rejected an informal $15-a-share offer from Liberty's CEO Greg Maffei in July, according to the Wall Street Journal on the belief it could get a higher price elsewhere. After trading above $14 in the wake of that report, Pandora shares fell to near $10 a share this month.

Pandora declined to comment, citing a policy against commenting on speculation. Reuters reported Friday that Pandora is making no new effort to sell itself and is focused on executing its strategy and its operating model. It cited an unidentified source.

Tim Westergren, Pandora Media
David Paul Morris | Bloomberg | Getty Images

The company has faced pressure to sell itself from activist investor Corvex Management, a hedge fund run by Keith Meister.

"Despite its many strengths, the company has been unable to date to translate its great product into a great business with an attractive public market valuation," Corvex wrote in a letter earlier this year. The fund controls 9.9 percent of the company's stock directly and through options.

Corvex, along with some other large shareholders, Matrix and Eminence, have now unified around the idea of a sale, expressing their frustration to Pandora's chairman, sources said.

Faber Report: Pandora
Faber Report: Pandora

Meanwhile, Liberty's Maffei has been public about the potential benefits of a tie-up between satellite radio company SiriusXM and Pandora.

"We think that the free space, whether it be commercial terrestrial radio, or Pandora, is still a very attractive space," Maffei told CNBC last month. "And we talked about how we'd like to find a way to participate. I think the streaming business, which Pandora seems to have doubled down on, is a very unattractive business. So there are parts of Pandora that could be attractive. And there's parts that we'd have questions about."

It all comes amid fiercer competition in the online streaming space, with Apple, Google and Amazon moving to compete with Pandora and Spotify. Spotify has also reportedly looked to team up with SoundCloud, according to the Financial Times.

Correction: This story was revised to correct the spelling of Eminence.