Shares of Live Nation have risen after a Friday New York Post report claimed the company is in early buyout discussions with Liberty Media. Shares rose 6% on Friday but were down over 3% in early Monday trading, suggesting the market was less certain a deal would get done.
Liberty Media, Live Nation's largest shareholder with 20% of shares, has a deep relationship with Live Nation. Its chairman, John Malone, was made Live Nation's interim chairman after Barry Diller vacated that post in October. Irving Azoff, previously Live Nation's executive chairman, replaced Malone as chairman in February. Liberty CEO Greg Maffei joined Live Nation's board in February.
Liberty upped its stake in Live Nation in February by acquiring 1.8 million shares for $18.8 million. At the same time it also agreed to purchase another 5.5 million shares.
The Post suggested that private equity firm Thomas H. Lee Partners could help fund the deal with the help of another participant. At current stock price, the deal would be worth about $3.6 billon. The company's market capitalization is $1.93 billion at its current $10.59 per share and it has $1.67 billion in debt as of March 31.
Going private could be beneficial for Live Nation. As is typical for a company undergoing transformation, Live Nation could benefit from the freedom to pursue a long-term business strategy without constant criticisms and assessments of analysts. Live Nation currently has its financial performance publicly dissected every three months even though its strategy may not bear fruit for another few years.
And because Live Nation's stock is down 6.1% in 2011, and traded below $10 as recently as April, now may be a good time for Live Nation to be taken private. Concerns about general economic conditions, consumer entertainment spending, gasoline prices and the company's ability to rebound from a challenging 2010 touring season have helped push shares lower this year. (In contrast, the S&P 500 is up 1.4% and Nasdaq is down less than 0.1% year to date.)