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Anthem Entertainment Up for Sale, Again

With its hodgepodge of music assets, the company is running into the same challenges it did when it was previously shopped in 2017.

Anthem Entertainment, the Canadian music company backed by the Ontario Teachers’ Pension Plan, is up for sale again, but according to sources, the company is running into the same challenges as it did when it was shopped in 2017: Its hodgepodge of music assets are much tougher to monetize than traditional song catalogs.

Sources say Anthem’s financial results include about $70 million in net publisher’s share, or gross profit, and about $30 million to $35 million in earnings before interest, taxes, depreciation and amortization (EBITDA). Other sources dispute the EBITDA number, saying that Anthem is a much more profitable company nowadays.

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Meanwhile, sources add that investment bank Moelis & Co. is shopping the deal and seeking minimum bids of about $600 million but didn’t give an overall valuation for the company. Moelis is also currently shopping Tempo Music.

However, a quote from Anthem Entertainment CEO Helen Murphy supplied following a request for comment suggests that the process could yield an outcome besides the sale of the company.

“This is a very exciting time for Anthem, as we look to strategically broaden our opportunities globally,” Murphy said in a statement. “Anthem has hired an investment bank to help it evaluate all of its strategic growth options. The company has strongly emerged from the worst phase of the COVID 19 pandemic, having grown across all segments of its business, and we want to continue to capitalize on our growth momentum.”

In 2017, Anthem Entertainment, then called Ole, was first shopped by RBC Capital Markets in what turned out to be a busted auction when bidders failed to offer the $800 million price the company was seeking, in an auction that also came with a requested minimum bid threshold of $600 million. The Ontario Teachers’ Pension Plan needs Anthem to fetch at least $600 million in order to help fund the pensions of the nearly 330,00 retirees and working teachers it supports.

In the latest attempt to sell Anthem, the company and Moelis first approached prospective suitors in November 2021, but the auction came with two problems — the first being that the non-disclosure agreement that needed to be signed in order to receive Anthem’s financials was so onerous that some potential bidders passed on looking at the deal.

The other main problem is what stymied the deal the first time around. Back then, Ole, as it was then known, had $57 million in net publisher’s share and $35 million in EBITDA. But at the time, almost 50% of its revenue came from TV, film and other audio-visual secondary rights, while 30% came from production music and 5% came from a small catalog of master recordings (Anthem owns the Rush catalog through acquiring the band’s Anthem Entertainment, which later allowed them to be rebranded with that name).

That meant that only about 17% of its revenue came from traditional song publishing royalties from songs by the likes of Rush, Timbaland and Steven Tyler. Generating revenue for production music is work-intensive, less profitable, and consequently, it just doesn’t trade, nor achieve, the high multiples and valuations that traditional song catalogs realize.

By 2018, the company, founded in 2004, had already poured some $540 million into making acquisitions and at that time controlled a catalog of 55,000 songs and 60,000 hours of TV/film music.

In fact, the 2017 busted auction was attributed to the hodgepodge of assets assembled under founder Robert Ott’s tenure in leading the company.

With the departure of Ott after the failed auction, former Warner Group CFO Murphy was hired as CEO, and since then Anthem has been working hard to up the traditional song publishing component. Among other subsequent deals under Murphy, Anthem acquired 50% of Wrensongs; bought a song catalog from the Boardwalk Music Group; and acquired the Kelly Archer song catalog, which includes such country hits as Travis Denning’s “After A Few” and Justin Moore’s “Somebody Else Will,” both of which hit No. 1 on Billboard’s Country Airplay chart, and Brett Young’s “Sleep Without You,” which reached No. 2.

With all the wheeling and dealing that Murphy has been up to since joining the company, sources suggest that Anthem now generates 50% of its revenue from straight music publishing. That’s good news for the valuations, as song catalogs trade for higher multiples than production music catalogs.

Still, sources say that while Murphy has dramatically changed the focus of Anthem, diversifying into more traditional  evergreen music assets during her tenure at the helm, the company is still stuck with the mixed bag of revenue streams assembled under Ott, which might be hard to digest for some traditional potential bidders, particularly the institutional investors. Others say that how Anthem classifies some production music revenue as NPS could leave questions in the minds of some suitors. Additionally, some of its acquired operations, like Jingle Punks and Compact Media, may not fit into the investment strategies of the many pure equity financial institutions that have come into the industry seeking investment returns on song catalogs.

Normally, a $70 million NPS number might suggest a valuation of well above $1 billion. If Anthem’s song catalog is now generating 50% of revenue and could produce, say, 65% of NPS — since traditional song publishing is less work-intensive and thus less costly to administer than production music — the Anthem song catalog itself might be worth as much as $800 million, not including whatever additional valuation could be placed on its production music and other rights management operations. In other words, a source suggests that collectively, Anthem might very well be flirting with a $1 billion valuation already.

Last year, Anthem obtained a $550 million credit line from a consortium of banks that included traditional music lenders like Truist, Fifth Third Bank and Pinnacle. That line had two components — a $400-million revolver and a $150-million accordion –which provides additional funds above the $400 million if needed. Its unclear how much debt Anthem has, which could also impact the deal.

In its latest move to sell Anthem, sources say Moelis is going back to some of the suitors that initially passed on looking at the deal, possibly with a lightened NDA.

But another source from the financial sector suggests that with an asset of this size, scale and complexity, it sometimes takes time to find the right home and get a deal done. On the other hand, a music industry source observes that the Anthem music assets would be a better fit for a strategic buyer than the financial companies now buying up music assets.

A spokeperson for investment banking firm Moelis declined to comment for this story.