Sony Corporation has signed a deal to acquire a 60 percent share in EMI Music Publishing from a consortium led by the Mubadala Investment Company. It increases Sony’s stake in the company to 90 percent overall, in a deal that carried a $4.75 billion valuation.
It appears the Michael Jackson estate still owns the remaining 10 percent of EMI Music Publishing.
With both parties signing a “legally binding” memorandum of understanding for the acquisition — which is pending regulatory approval and other conditions before it can close — the arrangement will give Sony publishing assets that generated about $1.334 billion in revenue last year, Billboard estimates.
“We are thrilled to bring EMI Music Publishing into the Sony family and maintain our number one position in the music publishing industry,” said Sony Corp. president and CEO Kenichiro Yoshida in a statement. “The music business has enjoyed a resurgence over the past couple of years, driven largely by the rise of paid subscription-based streaming services. In the entertainment space, we are focusing on building a strong IP portfolio, and I believe this acquisition will be a particularly significant milestone for our long-term growth.”
EMI generated adjusted earnings before interest, taxes, depreciation and amortization of $249 million on revenues of $663 million in the fiscal year ended March 31. Sources previously told Billboard that EMI had a net publisher share of $320 million. For EBITDA, that means the company’s valuation implies a 19.1 times multiple. For NPS, that implies a multiple of about 14.5 times.
Sony/ATV, which has been serving as the administrator for EMI Music Publishing, has revenues of about $600 million or more, while the remainder of the $671 million in publishing revenue that Sony reported in the year-ending March 31, 2018, is from Sony Music Japan.
According to the announcement, Sony will assume EMI’s debt, which totaled $1.359 billion as of March 31, 2018, and expects to pay $2.3 billion, which totals $3.659 billion. That means that the equity stake of the other half of the consortium, Sony and the Jackson estate, is valued at $1.091 billion. No word yet on whether Jackson estate will remain a stake holder, when all is said and done, although their presence might prove to be a benefit in the regulatory process.
EMI Music Publishing owns or administers over 2 million songs that include classics by Queen, Carole King and the Motown catalog, along with contemporary songs from Kanye West, Alicia Keys, Drake, Sam Smith, P!nk, Pharrell Williams, Calvin Harris, Fetty Wap, Hozier and more, according to Sony.
“EMI Music Publishing represents one of the world’s largest and most diverse catalog of copyrights with iconic songs that span every decade over the last one hundred years,” said Mubadala Capital head of private equity and EMI Music Publishing chairman Adib Mattar in a statement. “The sale of our consortium’s interest in EMI Music Publishing represents a milestone for Mubadala and our private equity business.”
Mubadala was the lead in a consortium described as Partner A, also consisting of Jynwel Capital, Blackstone/GSO and Pub West, LLC, believed to be a company owned by David Geffen. With all of those entities to no longer be owners, the deal — if completed — will leave ownership is the hands of Partner B, i.e. Sony and the Jackson estate.
The two investment groups, the Mubadala-led group and the Sony/Jackson Estate group, bought EMI Music Publishing for $2.2 billion in 2012. At the time of the deal, they agreed that the Mubadala group could choose to sell their investment in EMI after six years of ownership; and if they chose to sell Sony Corp. would have a two-month exclusive window to decide if it wanted to buy and negotiate that deal. That window was to begin June 29, but this agreement curtails speculation on how that process would play out.
When the transaction closes, “Sony expects to record in operating income a non-cash step-up gain of approximately 100 billion yen ($902 million) for the equity interest in EMI Music Publishing it currently owns,” according to the announcement. “The step-up gain and the consolidation of EMI Music Publishing has not been included in Sony’s forecast of consolidated financial results for the fiscal year ending March 31, 2019, and Sony is currently assessing the impact of this step-up gain and the consolidation of EMI Music Publishing on its consolidated financial results for the fiscal year ending March 31, 2019.”