Universal Music Group has agreed to acquire Ingrooves, the independent distributor that it has long had a strategic alignment with in addition to holding about a 25 percent stake in that company.
Terms of the deal are not being disclosed. In making the announcement, UMG acknowledges it has been a "minority investor in Ingrooves since 2006, and under the agreement, will acquire the shares of Ingrooves that it doesn't already own. After the transaction closes, Ingrooves CEO Bob Roback will continue to lead the company as a standalone unit within UMG." The deal is expected to be closed by the end of the first quarter.
UMG says it is making the acquisition to strengthen "its commitment to independent artists and labels," adding that the deal complements UMG's existing distribution and marketing relationships with the global independent music community. Moreover, the company points out that as a longtime partner and client of Ingrooves, UMG has a deep understanding of the company and its innovative technology and data insights, and will work closely with the Ingrooves management team to provide additional resources and expanded geographic reach.
"I'm thrilled to advance UMG's long-standing relationship with Ingrooves, a company we already view as a member of our extended family," UMG CFO and president of operations Boyd Muir said in a statement. "The continued success of the indie community is vital to the health of our industry, and through our investment in Ingrooves, we will strengthen the services we can offer to independent artists and entrepreneurs. I'm pleased to welcome Bob and his team to UMG and I'm looking forward to growing Ingrooves together."
The deal comes nearly a year after majority owner Shamrock Capital put Ingrooves up for sale in an auction run by LionTree Advisors. At the times sources said Shamrock was asking for about $100 million to buy the company, but because Shamrock was so closely tied to UMG, some suitors felt that its valuation would be undermined due to losing whatever business it had with UMG. For one thing, Ingrooves delivers music from Universal Music Group's distributed independent labels to digital services, comprising nearly one-third of UMG's U.S. market share. Consequently, those suitors said they thought the valuation should be more in the range of $65 million.
According to an Ingrooves spokesman, the company's distributed labels include Strange Music (Tech N9ne), Rostrum (Mac Miller, Wiz Khalifa catalog), CM7 Records (Chante Moore), Seeking Blue and Del Records, among other labels.
While the deal won't grow UMG's U.S. industry leading market share, since Ingrooves is already counted in UMG's market share under "Other" in Nielsen Music, in the past sources place its market share at about 2 percent. In addition to digital distribution, Ingrooves capabilities also offers music publishing services, neighboring rights and an artists services division. But the deal likely will have an impact on UMG's topline revenue as Billboard estimates Ingrooves annual revenue at about $150 million.
Ingrooves has invested heavily in systems, and provides independent labels, artists and other content owners with scalable tools that include analytics, rights management services, and marketing solutions.
When this acquisition closes, UMG will wholly own two independent distributors, as it already owns Caroline. According to the announcement, UMG will form a strategic partnership between its Caroline International division and Ingrooves to form a robust platform for distribution, marketing and label and artist services throughout the world.
In the past, UMG owned Fontana, an independent distribution company, but it was sold and merged into Ingrooves in 2012 in exchange for about $10 million in cash and a 22 percent stake in the latter company. That stake has subsequently grown to about 25 percent, sources say. Between Caroline and Ingrooves, UMG's indie owned distributors will have a combine market share of about 4.4 percent Billboard estimates, based on year-end numbers. In addition, last year UMG established a relationship with another indie distributor, Empire, to provide global distribution for "select artist projects," according to a press release.
The deal apparently is not large enough to require regulatory approval from the U.S. or EU regulatory agencies but there might be some territories that where the local agencies will weigh in on the transaction, according to sources.
"This acquisition by UMG represents the very best possible outcome for Ingrooves, our employees and our artist and label partners," according to a statement from Ingrooves' Roback, who will report to Muir. "Our mission at Ingrooves has always been to provide our clients with the very best services and maximize the value of their music. With UMG, we are gaining the resources, global reach and technology to take those efforts to another level. I'm excited at this opportunity and I'm thankful for the support of Boyd and [UMG chairman and CEO] Sir Lucian Grainge."