An investment group comprising of KKR and Dundee Partners, the investment office of the Hendel Family, have acquired the Kobalt Music Royalty Fund II for $1.1 billion, the two parties announced on Tuesday.
The acquirers have formed a platform called Chord Music Partners to manage the investments of the royalty fund, which was sold by Kobalt Capital Ltd. The music assets owned by the fund—which were not disclosed in the press release announcing the deal—will continue to be administered by Kobalt Music Publishing through a multi-year agreement, they said.
In addition to those music assets, KKR will contribute other music assets it has acquired in the last year. According to the announcement, the strategy consulting firm mtheory was instrumental in the formation of Chord. Separately, KKR has announced a partnership with BMG to buy music assets in what was described as a $1 billion deal pipeline earlier this year.
The deal between Kobalt and KKR was first reported by Billboard.
The acquired fund’s portfolio is comprised “primarily of music publishing copyrights for established works and includes a diverse collection of over 62,000 copyrights by highly acclaimed artists and songwriters across Pop, Rock, Dance, Hip Hop, Country and other genres,” the company said. While the songs in that catalog were not disclosed, sources say it includes the SONGS Music Publishing catalog, which owns songs by Lorde and the Weekend, acquired for about $180 million at the end of 2017; and Glassnote Records master recordings and that label’s Insieme music publishing operations, which were acquired either wholly or partially in what sources said at the time was an $80 million strategic partnership with Kobalt; and the catalog of songwriter David Hodges, which Billboard estimates Kobalt acquired for $7 million to $10 million.
Overall, sources say the Kobalt royalty fund produced $55 million to $65 million in net publishers’ share (gross profit), so the latter end of the range calculates out to about a 17 times multiple (16.9 to be exact) while the front end of the range translates into a 20 times multiple.
“We look forward to investing in the success of this music and working collaboratively with Kobalt and the artists and songwriters who created,” this diverse collection of iconic songs, KKR partner Jenny Box said in a statement. “This transaction positions us with significant scale, which we will continue to grow by providing flexible, creative capital to music rights owners. Across KKR, we are investing in innovative technology, media and entertainment businesses that are connecting fans to music in new ways and we are excited about how this can enhance the value and reach of these songs.”
According to the official announcement, KKR has broad experience investing in artist-centric businesses — and in the music industry through such bands as Gibson Brands and Alpha Theta (f.k.a. Pioneer DJ), as well as in digital media and content companies, such as ByteDance (TikTok), Jio Platforms (JioSaavn), Epic Games, OverDrive, RBmedia, ArtList, UFC, Leonine, Next Issue Media and Nielsen.
Meanwhile, the Hendel family investment office Dundee Partners has previously made investments in such companies as Partisan Records, Knitting Factory Entertainment, Left Music Publishing; and also had a hand in creating the Broadway hit Fela!, the musical that tells the life story of Fela Kuti, the Nigerian activist and Afrobeat pioneer.
The transaction connects the portfolio’s contents with long-term owners who are deeply committed to respecting artists and investing in the longevity and global reach of their music, according to a statement.
“When we launched Kobalt Capital in 2011, we wanted to work with music we loved and would continue to live on for many decades to come, Kobalt Capital chief investment officer and Kobalt Music Group chairman and founder Willard Ahdritz said in a statement. “Our announcement today acknowledges this focus, our predicted market development and the great work we have done at KCL. I am also proud that creators and rights owners put their belief in us to take care of their timeless music and represent it well.”
Kobalt Music Publishing represents over 600 publishers, more than 25,000 songwriters and over 700,000 songs; and also runs and will continue to build AMRA its global digital collection society.
“Kobalt Music Publishing will continue to act as the core administrator and synch licensing partner for the Fund II portfolio,” Kobalt CEO Laurent Hubert said in a statement. “We are excited to work with KKR, Dundee Partners and the many songwriters we have partnered with for years as we continue to deliver market leading service to all stakeholders to grow the reach of the music we all love.”
KKR is investing through its Dislocation Opportunities Fund and certain other private credit investment funds and vehicles, according to the announcement. In announcing consultants which worked on the deal, Kobalt Capital was advised by the Russell’s law firm; and mtheory advised KKR and Dundee Partners on the transaction. The legal work was handled by Latham & Watkins LLP for KKR while FTI Consulting also advised KKR on asset valuations; and DLA Piper, Manatt, Phelps & Phillips, LLP, Jefferies LLC and Inkling Capital, LLC advised Dundee Partners.