Concord Music Being Shopped to Private-Equity Firms, Not Strategic Suitors

Concord Music Being Shopped to Private-Equity Firms, Not Strategic Suitors

Reports that the Concord Music Group is up for sale are true, knowledgeable sources say. But there is one key factor that appears to have been overlooked thus far: management is controlling the company's sale process so far.

Consequently, Concord is being shopped to private-equity firms and not to strategic suitors, according to some strategic sources who have confirmed they haven't been contacted to partake in the auction.

According to sources, the Concord management team believes there is a lot of opportunity to grow the company through acquisition. But it doesn't have the cash to make those plays while it's a part of Village Roadshow Entertainment, which recently underwent a re-financing but needs that funding to fuel its own growth.

The Concord plan is to find a private-equity firm to not only buy the company, but also invest in management's vision by keeping in place the team lead by Concord Music Group president/CEO Glen Barros, sources say.

News of the potential sale was first reported by Sky News, which suggested that Concord would be a good fit with the EMI recorded music assets, including Parlophone, Chrysalis and Sanctuary, being shopped by the Universal Music Group. But the divestiture was mandated by the EU, which also put on the condition that those assets would be sold to strategic suitors.

If that mandate is followed, it means the suitors that qualify to partake in the Parlophone auction wouldn't qualify for the Concord auction, which is being run by the Raine Group, according to sources. However, sources say Concord's management team agrees with the assessment that it would be a good fit with the EMI assets. That's why it's hoping to land a new private-equity owner, which would allow it to participate in the auction for the EMI recorded music assets, sources say.

Suitors for Concord include Ron Perelman's MacAndrews & Forbes and the private-equity team of the Gores Group and Platinum Equity, both bidders for the Warner Music Group, sources say. While private-equity theoretically can't participate in the Parlophone auction, a bid for Concord could be a ticket into the Universal auction. Private-equity could just team with a well-known record label executive and gain entrance, too. The data room for the Universal auction is expected to be open to bidders later this week, sources say.

Concord began life as Concord Jazz and at one time was owned by Alliance Entertainment. But when that firm went through a Chapter 11 restructuring in the mid-1990s Concord Jazz was sold to Norman Lear and the late Hal Gaba. In 2004, Concord won the auction to buy Fantasy Records, paying about $83 million for the label, which in addition to owning a large jazz catalog and the Creedence Clearwater Revival catalog also owned the Stax catalog. At the time, Fantasy had revenues of about $22 million and a publishing catalog that produced $2.5 million in net publisher's share. In 2008, Lear merged Concord with another one of his investments, Village Entertainment.

In 2010, Concord acquired Rounder Records -- which has a catalog of music by Alison Krauss, Mary Chapin Carpenter, Bela Fleck, Steve Martin, Madeleine Peyroux, Robert Plant, Raffi and Willie Nelson -- for an undisclosed amount.

Concord has annual sales of about $75 million and produced earnings before interest taxes depreciation and amortization of about $14 million, sources say. Its publishing catalog, meanwhile, generated about $3 million in net publisher's share.

All companies mentioned in this article either declined to comment or didn't respond to a request for comment at press time.


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