Primary Wave Music has received $1.7 billion from the Canadian investment company Brookfield Asset Management Inc. to fund song catalog acquisitions in a deal totaling around $2 billion that will likely reignite the competition for music assets, the company announced on Thursday (Oct. 6).
Brookfield, known for its portfolio of high-end commercial real estate and infrastructure assets, becomes a minority shareholder in Primary Wave as a result of the deal, along with the entertainment and sports agency Creative Artists Agency, according to a joint statement from the companies. Primary Wave’s chief executive and founder Larry Mestel, along with his management team, remain the company’s largest shareholder, according to a company spokesperson.
The deal shows that higher interest rates and an uncertain global economic environment — factors that have brought deal-making to a standstill in most industries — have done little to dampen the appetite of some wealthy investors and music companies like Primary Wave.
Brookfield’s $1.7 billion will go into a new, separately-managed permanent capital vehicle to be used to acquire new song catalog assets. Also part of the deal, Brookfield bought $700 million of music rights from Primary Wave’s first two funds, and will roll those rights into the permanent capital vehicle.
Those first two funds remain open, and, along with a third Primary Wave fund, they now have over $2 billion in combined assets under management, according to sources familiar with the funds. That is up from roughly $946 million in combined total assets invested in funds 1, 2 and 3, acorrding to the most recent SEC filings available.
Primary Wave has been highly active, finalizing more than $300 million worth of deals so far in 2022, including purchasing music rights from members of Def Leppard, Alice in Chains, and America, as well as Henry Mancini, Paul Rodgers of Bad Company and Free, and a stake in the estate of Prince.
Primary Wave has another $600 million in pending transactions, according to the firm that bids itself as a music company with marketing, branding, digital strategy and licensing infrastructure. Some current projects include the upcoming Whitney Houston Biopic ‘I Wanna Dance With Somebody’ and a four-part James Brown documentary series for the A&E Network, produced by Mick Jagger and Questlove. Primary wave announced last year that it bought much of the soul legend’s rights for $90 million.
“We’ve got a lot in the pipeline,” Mestel tells Billboard. “We’ve closed a number of deals that we’re just starting to announce.”
Brookfield has not previously invested in song catalogs or music assets, but the Toronto-based firm said in September it had a “record $111 billion USD of cash and capital available for investment.”
“Brookfield is among the most intelligent and well financed deal-makers in the world,” Mestel said in the statement. “What separates them from every other financially oriented investor of their size is their creativity, long-term horizon and ability to help scale unique businesses with operational expertise in addition to capital.”
Mestel and the rest of Primary Wave’s management team will remain in charge of the company and the board.
“We are thrilled to deliver a comprehensive capital solution to Larry and the team at Primary Wave to support their continued acquisition of the world’s most iconic music IP,” says Angelo Rufino, managing partner, Brookfield. “Strong secular growth trends, scarcity value of assets and the continued penetration of music in new forms of content delivery underpin this significant commitment to the asset class.”
Mestel says that the company’s strategy will remain the same going forward, even as they target assets in Asia, Africa and the Middle East
“Our vision is going to remain very similar to what we’ve done over the last 16 years,” he says. “Target the best of the best when it comes to music. But we also will likely do more deals of the same type of iconic and legendary nature in emerging markets.”
He continues, “There’s clearly a lot of competition for the assets we look for. But we are a very unique partner because of our ability to grow the value of these assets through our infrastructure. There are very few competitors that have the creative, brand marketing, marketing and content creation infrastructure internally that we have, which is why we are usually the choice of the artist and their representative to do deals with.”
UPDATE: This story was updated Oct. 6 at 6:52 p.m. EST to include comments from Primary Wave CEO Larry Mestel and more details about Brookfield’s investment.