MSD Capital, the private investment firm of Dell Inc. founder, chairman, and CEO Michael Dell, has paid $25 million for a 9.9% stake in Kobalt Music Group, according to people familiar with the transaction.
In making an investment in Kobalt, MSD Capital bought out nearly half the stake held by Spark Ventures (the rest belongs to Balderton Capital, which acquired the other half last summer).
With this deal, Spark Ventures cashed in its stake in Kobalt, leaving Balderton with an increased stake at nearly 34%. This means that MSD and Balderton combined own about 44% of Kobalt, which at the time the deal was negotiated, apparently had a $250 million valuation.
"The backing of such a highly-respected investment firm is a statement of confidence in the strength of our business model and our growth strategy," Kobalt founder and CEO Willard Ahdritz said in a statement. "We continue to invest in the future of the music industry, and MSD Capital’s investment will assist Kobalt to continue its rapid growth."
According to sources close to the deal, Kobalt's revenue grew by nearly 40% to about $250 million in its most recent fiscal year.
In addition to making an investment in the company, Dell Inc. is also a strategic technology services partner to Kobalt. "As the music industry moves to the forefront of demonstrating the transformative power of information technology, Dell Inc. is the preferred partner supporting the growth and success of its leading companies," Dell said in a statement.
In addition to buying out Spark Ventures for $10 million, MSD also placed an additional $15 million equity into Kobalt. Ahdritz told Billboard that the company will use the new capital to continue funding growth, and will invest in technology and territorial expansion.
"Kobalt was designed for what we see taking place in the market today," Ahdritz says. "I am quite pleased that the vision that I had when I started the company in 2001 -- that data and technology are needed to deliver great services -- is beginning to come together in 2014. I am happy to have one of the biggest entrepreneurs in the world share that vision."