Super D Acquires Alliance Entertainment, Creating Second Largest US Music Wholesaler (Sources)

Super D has acquired Alliance Entertainment in a move that will create the second largest U.S. wholesaler with revenues of about $920 million, sources tell Billboard. The deal closed earlier Wednesday (Sept. 4) and Super D principals Bruce Ogilvie and Jeff Walker were conducting conference calls into the evening with retailers and vendors to reveal the news, sources say.

Billboard estimates that the combined company will have music sales of about $450 million, and a combined market share of 6.64%, making it the fourth largest music account in the U.S. behind iTunes, Anderson Merchandisers and Amazon.

Terms of the deal are not going to be disclosed, but Billboard estimates that Super D paid somewhere in the range of $85 million and $125 million. The $85 million represents the amount that Platinum Equity and the Gores Group paid for Alliance when it acquired the company in 2011.

The higher range represents a Billboard guesstimate that Super D paid three-times earnings before interest, taxes depreciation and amortization, which was $39 million in 2011 and projected to be $45 million in 2012, according to what sources told Billboard when Alliance was up for sale (Dec. 1, 2012). (If you split the difference between $39 and $45 million, it comes to $42 million times three, which equals $126 million.)

In the past, wholesalers would command a multiple of at least four times EBITDA, but with physical on the decline and its future in question, a three-time multiple seems like a safer bet, and maybe a bit high.

The remainder of the combined business -- another $470 million -- is mostly in DVD sales, with a small amount of accessories sales. With Anderson Merchandiser purely acting as a rack-jobber, Baker & Taylor becomes the sole remaining large competitor in both the one-stop business and Internet CD fulfillment space.


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