Business

Blackstone In Talks With Merck Mercuriadis on New Pipeline of Funds for Acquisitions

Merck Mercuriadis
Spencer Lowell

Merck Mercuriadis and his dog Louis photographed on February 8, 2021 in Los Angeles.

Blackstone is negotiating a deal with Merck Mercuriadis that would see the equity firm team up with the music executive and his company, The Family (Music) Ltd., to buy music assets, according to industry sources. The potential deal was first reported by Bloomberg.

According to sources, the deal being negotiated would see Blackstone buy equity in Mercuriadis' Family (Music) platform, with the investment firm providing what Bloomberg says is a $1 billion pool of funding to finance subsequent acquisitions of music assets like music publishing copyrights and master recording royalties. The acquired assets would then be managed through The Family (Music) platform, sources suggest.

If the deal is completed, The Family (Music) will add to Blackstone's growing portfolio of music assets. In April it acquired eOne Music and it also owns the SESAC family of companies, which includes the Harry Fox Agency, Audiam and other assets.

The Family (Music) is already serving as the investment advisor for the publicly-traded Hipgnosis Songs Fund, which Mercuriadis founded and for which he also offers up music assets for the fund to buy. That fund currently has a market capitalization of $1.47 billion and boasts a portfolio that includes works by Neil Young, Al Jackson Jr., the B-52's, Blondie, Journey, Lindsey Buckingham, Journey, Steve Winwood and Tricky Stewart, among many others — all through deals Mercuriadis sourced and negotiated for the fund.

But Mercuriadis has publicly said he has built up a $1 billion pipeline of deals and lately his fundraising from the stock market has been falling short of goals, which has resulted in negotiated deals leaving for other suitors who can close them, sources say. Consequently, for months Mercuriadis has been thinking about turning to private equity funding to buy music assets, informed sources tell Billboard.

However, sources say such a move would trigger complex negotiations not only with Blackstone with the Hipgnosis Song Fund. The easy part would be how to structure deals. Similar to the arrangement that Sony Music had with its joint venture partners in EMI from 2012 until it bought out those partners in 2019, any deal Sony was going to make, it would have to offer half to the EMI property too. So The Family (Music) could offer deals to its private and public companies on a 50/50 basis, that is, if the public fund has the money to participate.

The harder part would be negotiating under what circumstances could the Family and private Blackstone funding work on its own, when the public fund doesn't have any dry power for participating in new deals that Mercuriadis brings to the table, according to one financial executive.

Besides that, other industry sources remind that the agreement between the Hipgnosis Songs Fund and Family (Music) contains a contingency should the latter decide to terminate its relationship with the fund. The investment advisory agreement states that The Family (Music) has the "unconditional right" to purchase the fund's "portfolio" of songs, up to six months after the termination date. It would have to pay a purchase price that is higher than fair market value or market capitalization -- whichever is higher -- or any price offered by a credible third party.

Consequently, some wonder if any potential deal between Blackstone and The Family (Music) would also include buying the music assets in the Hipgnosis Songs Fund. However, last February, Mercuriadis told Billboard, "This is not a scenario that anyone is contemplating." Moreover, another source says this is not a part of the deal being negotiated between Blackstone and Mercuriadis.

Representatives for The Family, Blackstone and SESAC, which is owned by Blackstone, either said no comment or didn't respond to e-mails or phone calls seeking comment.