2019 American Music Awards

SiriusXM Buyout of Live Nation Not Imminent, But Analyst Says Deal Makes 'So Much Sense'

Courtesy of Live Nation
      

Here's what the world's biggest concert promoter would gain by joining with satellite and broadcast radio.

A new report from media and tech analyst Brandon Ross of BTIG has revived speculation about a Liberty Media-backed buyout of Live Nation as part of a larger roll-up that could include acquiring iHeartMedia out of bankruptcy and installing Live Nation CEO Michael Rapino to run the whole show.

While sources tell Billboard that no deal is in the works and Live Nation board members aren't considering a formal proposal, Ross has set a one-to-two year timeline for a potential merger he calls a "win-win-win" for Liberty, Live Nation and SiriusXM. Liberty owns 34 percent of Live Nation -- the maximum it can own under an agreement created during the 2010 Ticketmaster merger rules -- and it owns 70 percent of SiriusXM. In June, Liberty made a $1.6 billion bid to buy bankrupt IHeartMedia but withdrew it weeks later because senior creditors said the amount was not enough, but informal talks have continued. Combining the three companies could create a vertically integrated music juggernaut. 

"To me this makes so much sense for everyone involved," explains Ross, who said such a deal would help SiriusXM earn stronger returns for shareholders on the cash they're bringing in from their 32 million subscribers, using the money to fuel international growth for Live Nation, which faces a maturing U.S. market and is looking for new opportunities abroad.

But Liberty's ownership of Live Nation is capped and Liberty Media CEO John Malone only controls two seats on Live Nation's 12-person board, which has not convened since talk of a buyout started earlier this month. Live Nation executives, meanwhile, see little strategic upside in merging with the satellite radio provider, whose subscribers center in the U.S., sources tell Billboard -- streaming services are growing much faster worldwide, even if they aren't turning profits. Owning a radio station network would be an incredible promotional tool for Live Nation, although Live Nation was owned by Clear Channel in the early 2000s and was ultimately spun because of anti-competitive concerns about using public airwaves to promote private concerts.

"In a perfect would, combining Live Nation and Spotify would make the most sense, but it’s unclear if that is a situation [Spotify CEO] Daniel [Ek] is comfortable with," says Ross, who adds that the streaming giant is currently focused on growing its customer base and improving its technology, although it does have existing partnerships with Live Nation and an integration with Ticketmaster.

Even if Live Nation were to seriously consider a bid from Liberty or SiriusXM, Spotify would have a shot at making a competing offer for Live Nation, as would others like Amazon, Apple and Google. Still, Ross says a bid from SiriusXM could be very attractive since the company could buy Live Nation with a mix of cash and stock, fueling international expansion while "allowing Live Nation shareholders to participate in the company's future."

Ross said any deal between SiriusXM and Live Nation would have to include an employment agreement to retain Live Nation CEO Michael Rapino and install him atop the combined company, along with other senior officers like President Joe Berchtold. Live Nation's stock is up 23 percent to $52 per share since the start of the year. But whether Rapino would be interested in taking on an aging satellite radio provider and a radio company that will need to be restructured is another question.

Bottom line: A SiriusXM acquisition of Live Nation would be a compelling way for Malone to put the pieces together of his music assets together, especially if he takes another shot at buying iHeartMedia. But its Live Nation's board of directors that holds the cards.

The topic is likely to come up Thursday during Live Nation's second quarter earnings call.


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