The Concord Music Group is being acquired by Wood Creek Capital Management, a private equity firm based in New Haven Conn., in a deal expected to close in a few days. While terms of the deal aren't being disclosed, sources say Wood Creek is paying Concord's parent Village Roadshow Entertainment Group about $115 million-$125 million.
As part of the deal, Concord president and CEO Glen Barros will remain with the label, heading up its management team, while chairman Norman Lear will become chairman emeritus and remain involved in the company.
The acquisition is being made on behalf of funds managed by Wood Creek and an individual investors group that includes members of Concord's senior management and music industry veterans Steve Smith, a principal in Bicycle Music, and Scott Pascucci, a former head of Rhino Entertainment.
Wood Creek, an affiliate of MassMutual Financial Group, also has a majority stake in Bicycle Music, a music publishing firm, and Varese Sarabande, a record label specializing in film soundtracks. Concord, which started out as a jazz label, owns the Stax and Fantasy catalogs as well as Rounder Records, Telarc and Hear Music.
This deal will make Wood Creek one of the largest owners of independent music assets, behind BMG. Other large players in the independent music community include E1 Entertainment, Curb, Disney Music Group, Cash Money, and Big Machine.
Village Roadshow Entertainment Group is agreeing to sell Concord in order to devote all of its recourses to its core film business. In a move to work with Concord management, the label was allowed to hire an investment bank that initially only shopped it to non-strategic buyers. Sources said that process only yielded bids that reached $115 million, short of the goal of $125 million that Village Roadshow sought. As a result, the company reached out to key strategic companies like the Warner Music Group and BMG, but those talks didn't progress too far because the former was tied up with its Parlophone acquisition and the latter was trying to figure out its financing in order to buyout Kohlberg, Kravis & Roberts. The Universal Music Group was never approached because Concord is already distributed by UMG, and such a deal likely would have set off alarm bells for anti-trust regulators.
When Concord management began shopping the company, it hoped to attract a buyer that could afford to grow through acquisitions of record labels and music publishing catalogs.
In fact, Concord was one of the suitors looking at Universal Music Group assets that were up for sale as part of its agreement with the EU regulators, but it never made a bid on any of the assets, sources say, probably because it didn't get its own deal completed in the time frame required by UMG.
Concord's Barros noted that with all that the label has accomplished to date, "there's such an incredibly bright future ahead of us. It was vitally important that we find the right investors with whom to continue this exciting journey." He added that Wood Creek had compatible values and goals.
Concord has annual sales of about $90 million and produced earnings before interest, taxes, depreciation, and amortization of about $14 million in its most recent fiscal year, sources say. Its publishing catalog, meanwhile, generated about $3 million in net publisher's share.
The company declined to provide information on how the acquisition will be financed, although it's typical that the acquiring firm would use a combination of equity and debt at a ratio of at least 40%-50% equity, with the remaining funds raised through debt.
Wood Creek CEO Brett D. Hellerman called Concord Music a "one of a kind company" with an irreplaceable catalog and artist roster and that Wood Creek will seek to preserve and build on the label's great legacy, which was built through the vision of Lear and former Concord chairman, the late Hal Gaba. He also said that Wood Creek will be an active investor in Concord, and that its team members Steve Smith and Scott Pascucci will work closely with the label's management.
"Today, we affirm Concord's status as a resourceful, vigorous independent music company," Hellerman said in a statement. "The value proposition to consumers, media and the creative community is clear: as Concord remains independent, the artist and music wins."
Concord's artist roster includes Paul McCartney, Paul Simon, Alison Krauss, Chick Corea, James Taylor, Carole King, George Benson, Kenny G, Steve Martin, Ben Harper and Esperanza Spalding, while its catalog includes records by John Coltrane, Creedence Clearwater Revival, Ray Charles, Miles Davis, Little Richard, Otis Redding, Thelonious Monk, Isaac Hayes, Ella Fitzgerald and Tony Bennett.
Reed Smith LLP and MESA represented Wood Creek, while Latham & Watkins LLP and the Raine Group represented Village Roadshow.