Warner Music announced early Wednesday morning that its acquisition group has raised $535 million in a secured senior notes deal. What it intends to do with those funds, which now add up to nearly a billion dollars on hand, remains to be seen — but there’s no shortage of possibilities and it’s likely that the company is in talks for some if not all of them.
As laid out by Music Business Worldwide just minutes after Warner’s announcement, it could be 300 Entertainment, home of Young Thug and Megan Thee Stallion, which sources have said is on the block for $400 million. While that would fly in the face of 300’s staunchly independent stance, the label’s key founders include Warner expats Lyor Cohen, Todd Moscowitz and current CEO Kevin Liles, and it has a long and close relationship with Warner, which distributes the company’s music. While sources insist no deal is on the table, they also say that it hears from suitors frequently.
Also in the mix is the late David Bowie’s song catalog — sources tell PvNew Warner is the front-runner, and Financial Times has reported the price as $200 million, although other sources say that number is low — or any of dozens of other top song catalogs that haven’t necessarily been rumored to be for sale.
The biggest fish of all is Concord, one of the world’s biggest independent music companies, valued at between $4 billion and $5 billion and majority-owned by Michigan State Retirement Systems — and on the block, as Billboard recently reported, although that whopping price tag not only places a full acquisition likely out of Warner’s reach, it would also be out of character for its CEO, Steve Cooper. However, the regulatory concerns that would likely ensue if Universal or Sony Music — the world’s two largest music companies —leave Concord with only so many options in traditional music groups. Concord’s sprawling assets include the Stax, Fantasy, Loma Vista, Razor & Tie, Kidz Bop, Fania and Rounder labels, Bicyle Music publishing, along with recordings by Paul Simon, James Taylor, R.E.M., St. Vincent, Elvis Costello, Common, Isaac Hayes, John Coltrane and many more.
Warner could also invest in properties in emerging markets, as it has made recent acquisitions or partnerships in Africa, Asia and South Asia; or digital properties and gaming properties such as Roblox, for which it joined a $520 million investment earlier this year.
Are all of those options on the table? Of course they are, sources tell PvNew — and today’s announcement doesn’t necessarily mean that one big deal is imminent, but that more deals are coming. “In times like these, it makes sense to have a big war chest,” one source said.
The wording of Warner’s announcement is almost comically noncommittal:
The Company intends to use the net proceeds of the Offering to fund a portion of the aggregate cash consideration for potential acquisitions by the Company of certain music and music-related assets, or if any of such potential acquisitions are not completed, for general corporate purposes. The Company may also use the net proceeds of the Offering to redeem all or a portion of the Notes (so long as, in the case of a partial redemption, at least $250 million of the Notes remain outstanding following such redemption) at any time on one or more occasions on or prior to the fifth business day following December 20, 2021 by giving notice at least five business days prior to such time at the special optional redemption price equal to the issue price of the Notes plus 1% of the principal amount thereof together with accrued and unpaid interest on such Notes from the date of issuance to but excluding the redemption date.
PvNew will have more on this situation as it develops.
