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Analyst: Live Nation–SiriusXM merger “inevitable”

According to BTIG's Brandon Ross, Greg Maffei's Liberty Media "would like a deal to happen" – although Amazon and Spotify are also believed to be waiting in the wings…

By Jon Chapple on 25 Jul 2018

Greg Maffei, SiriusXM

Greg Maffei

image © Live Nation

A merger between Live Nation and Liberty Media’s SiriusXM is inevitable in the near term, a leading Wall Street analyst has suggested.

Earlier this month, Live Nation’s share price climbed above US$50 for the first time, bolstered by rumours the concert giant could be the target of an acquisition by satellite radio provider SiriusXM.

Greg Maffei, CEO of SiriusXM parent company Liberty Media – which owns roughly a third of Live Nation – said in May that the company may look at “ways to have them [SiriusXM and Live Nation] work together”, and analysts have long espoused the potential benefits of a Live Nation/Ticketmaster–SiriusXM merger, which Citigroup’s Jason Bazinet says would create a “vertically integrated music titan”.

Brandon Ross, of BTIG Research – who said as long ago as June 2016 that Live Nation, SiriusXM and Pandora (since partially acquired by Liberty) “could act as a powerful end-to-end music distribution platform from live music to streaming music and radio” – now says an acquisition of Live Nation by SiriusXM in on the cards – if Live Nation’s board agrees to a deal.

BTIG has given Live Nation shares a price target of $60 and upgraded to ‘buy’

“We and a growing group of investors have come to believe a nearer-term combination of SiriusXM and Live Nation is inevitable,” Ross writes. “Or, put another way, that Liberty would like a deal to happen, which likely makes a transaction inevitable.

“A trail of data points has been widely circulated over the past month which give credence to this theory. The most interesting evidence comes from the words of [Liberty Media chairman] John Malone himself, in this excerpt from the 14 June WSJ: ‘There are some synergies amongst companies that we have a stake in that we’re still exploring’ that could lead to deals, Mr Malone said.”

Other indicators suggesting an acquisition is likely, continues Ross, are slowing growth at SiriusXM (SIRI), with a “Sirius acquisition of LYV [helping to] solve Liberty’s problems by helping to (at least optically) protect SIRI’s terminal value”; threat to SiriusXM’s in-car radio business from music streaming services and the “exploding popularity” of podcast apps; the attractiveness of SiriusXM’s free cashflow to Live Nation for further expansion; and the fact Live Nation CEO Michael Rapino was added to the SiriusXM board at the beginning of 2018.

Would Live Nation agree to a deal? Ultimately, reckons Ross, Rapino – who he predicts would become the CEO of the combined company – and Live Nation’s directors will “do what is in the best interest of shareholders”. While, “on a personal level, top management is financially incentivised to sell”, and “sure access to additional cash could expedite” Live Nation’s global ambitions, BTIG says SiriusXM’s cash is “not critical to the company’s long term”.

“We and a growing group of investors have come to believe a nearer-term combination of SiriusXM and Live Nation is inevitable”

To complicate matters, should SiriusXM bid for Live Nation, other bidders will likely emerge, says Ross – with “the most likely, in our view, are Amazon and Spotify”. (Music remains a “top priority for Amazon”, which could also “significantly improve Ticketmaster”, he writes, while Spotify and Live Nation could partner on 360 deals with artists, as well as “advertising and sponsorship packages, leveraging data and Live Nation generating content to catalyse Spotify’s video ambitions”.)

Whether or not a bid materialises, the analyst says Live Nation has a bright future ahead regardless. He predicts the “new normal LYV AOI [adjusted operating income] growth to be mid-teens”, highlighting the continued growth of the live music industry, the company’s effective pricing of its shows (‘slow ticketing’) and the “large international opportunity ahead” as reasons to be optimistic.

BTIG has given Live Nation (LYV) shares a price target of $60 and upgraded them to ‘buy’. The firm also predicts AOI of $851m in 2018, and $975m for 2019, compared to average (‘Street’) expectations of $827m and $912m, respectively.


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