The rumor is now reality. Live Nation, the former Clear Channel Entertainment, announced agreement on a tax-free merger of equals with Ticketmaster Entertainment. The combined enterprise value is estimated at $2.5 billion. If the merger goes through, the company will be called Live Nation Entertainment.
That $2.5 billion number is interesting because it shows how much the value of Live Nation has fallen since it alone was valued at around $2 billion when it was spun-off from Clear Channel, leaving behind around $2.5 billion in write-offs from the $4.4 billion that Clear Channel had paid to acquire the company originally known as SFX Entertainment. Being the nation’s largest concert promoter has not been demonstrated to be a growth business.
Under the deal announced Tuesday morning, Live Nation will swap 1.384 shares of its stock for each share of Ticketmaster stock. Current shareholders of Live Nation will wind up owning approximately 50% of the shares of the merged company – and likewise for Ticketmaster shareholders. The would-be merger partners say they anticipate generating approximately $40 million of operating synergies through the combination of their ticketing, marketing, data centers and back-office functions.
“This combination will drive measurable benefits to consumers and accelerate the execution of our strategy to build a better artist-to-fan direct distribution platform. As every industry observer knows, too many tickets go unsold and too many fans are frustrated with their ticket-buying experiences. The current inefficiencies in the system result in higher costs and confusion over access to seats. Together, we will work to simplify the ticketing process and ultimately increase attendance at live events. This is also a logical step in the evolution of our business model, creating a more diversified company with a stronger financial profile that will drive improved shareholder value over the long term,” said Live Nation CEO Michael Rapino.
“It was less than two months ago that Ticketmaster ended its 10-year partnership with Live Nation, and I’m extremely glad we could reunite with this combination. No different from any other industry, the challenges are all around every aspect of live entertainment. Being able to put Live Nation and Ticketmaster into an equal partnership will allow the companies to get through this difficult period and be able to expand live entertainment options to audiences throughout the world,” said Ticketmaster Chairman Barry Diller.
The combined company will be led by Barry Diller as Chairman of the Board, Michael Rapino as CEO and President of Live Nation Entertainment and Irving Azoff as Executive Chairman of Live Nation Entertainment and CEO of Front Line. Live Nation Entertainment’s board will consist of 14 directors, seven from each company.
Here are the benefits the companies say will come from a merger:
Improve Access and Transparency
By uniting an artist, promoter and ticketing company under a combined banner, the new entity will be positioned to address the challenges of serving fans better at the point of the initial ticket sale with more options and better access.
Improve Ticket Pricing Options
The merger will enable more innovative and dynamic promotion arrangements that create more choice and a more fan-friendly purchasing experience. As an example, the Eagles’ recent all-inclusive pricing initiative was favorably received by the public as well as the broader industry.
Invest in Better Ticketing Technology
The combination will enable increased R&D investment and the sort of technology advances that improve the ticketing experience for consumers and deliver best-in-class solutions to artists, other content owners and venues. Live Nation Entertainment will be better positioned to deliver technological advances such as paperless ticketing as well as interactive seat access and mobile delivery.
Increase Event Attendance
A very substantial portion of the tickets put on sale to the public for live events goes unsold. The new company will be positioned to take full advantage of its combined online resources, databases and promotional operations to strengthen and enhance the direct connection between artists and fans. This will create opportunities to improve attendance at events, benefiting venues and supporting a healthier live entertainment industry.
RBR/TVBR observation: As we noted previously, some Members of Congress went crazy over the alleged strangle-hold on the music industry created when Clear Channel Communications had the nation’s largest radio group and the predecessor of Live Nation under common ownership. The same outcry from Capitol Hill is likely this time – except that it will come before the merger actually takes place.
And, also as previously reported, Bruce Springsteen has already staked out a lead position in opposing the merger. He was a major show biz supporter of the Obama campaign and is now set to weigh in as the Obama Administration takes up its first major antitrust case. It should be interesting.