AEG Facilities–SMG merger draws regulator scrutiny
Competition regulators on both sides of the Atlantic are examining the proposed mega-merger of venue behemoths AEG Facilities and SMG, as the companies look to roll up an international portfolio that includes more than 300 venues.
Should the deal proceed as the two companies hope, a new venture, known as ASM Global, will be launched, with headquarters in Los Angeles. It would oversee 310 arenas, stadia, convention centres and performing arts venues across five continents, including some of the world’s best-known live music locations.
The UK’s Competition and Markets Authority (CMA) announced today (11 April) that it has launched a preliminary (‘phase-1’) investigation into the merger, following a partial deferment of the case to British authorities by the European Commission.
Interested parties are invited to comment on the case – which will examine “whether the creation of [ASM Global] may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services” – before 29 April 2019, ahead of the 24 June deadline for the phase-1 decision.
The CMA investigation also reveals that the new company will be called Wildlife Holdings Inc., presumably trading as ASM Global. Wildlife Holdings – to be jointly owned by AEG (Anschutz Entertainment Group Inc.) and Onex Corporation – applied for the “ASM Global” trademark on 7 February.
Regulators at the Federal Trade Commission (FTC) in the US are also believed to be looking into the merger.
Plans for the deal revealed in early February by private-equity firm Onex, which completed its acquisition of SMG Holdings in January 2018. The investment powerhouse says it and AEG Facilities will each own 50% of ASM Global following the merger – a deal it expects to complete in late 2019.
Complicating the merger is a stipulation that certain venues owned by AEG, such as the O2, AccorHotels Arena, Mercedes-Benz Arena and Staples Center are excluded from the deal, with AEG also retaining control of its owned venues and entertainment districts in Los Angeles, London, Hamburg and Berlin, as well as its sports, music and sponsorship divisions.
The CMA investigation reveals the new company will be called Wildlife Holdings, trading as ASM Global
For its part, Onex has committed to contributing its entire equity investment in SMG into the merger. SMG’s assets include Manchester Arena in the UK, König-Pilsener Arena in Oberhausen, Germany, and numerous arenas, stadia and convention centres across North America.
While the merger hopefuls hailed the deal as “a major step for our industry,” competitors are less enthused about what it could mean internationally. Former AEG president Tim Leiweke, who now heads up Oak View Group (OVG), states that the company’s lawyers are poring over the merger agreement to “figure out whether this is anti-competitive,” while others are also expecting a degree of interest from regulators, given the number of venues that will be under the one roof.
“It’s a frightening prospect,” notes one venues veteran. “When Live Nation were mooted to be interested in purchasing SMG, that kinda made sense. But Live Nation is not in the same league as AEG when it comes to venue ownership.
“My real fear is that if this goes ahead, there will be zero room for negotiation with ASM Global, which will be so powerful that they could simply dictate terms for the likes of security, caterers, cleaning and other contractors.” A culling of staff across AEG Facilities and SMG would also be expected.
Another source notes that the deal could further escalate artist fees should AEG Presents leverage its position with its venues in bidding wars with Live Nation. And he suggests that a resurrection of the bookings feud between AEG and OVG ally Madison Square Garden Company could broaden to other rivals, as venue operators look to safeguard their interests.
“However, not everyone is against the deal. Brad Mayne, president and CEO of the International Association of Venue Managers, told Convene that he sees positives in the merger from a business point of view. “The more venues you manage, the greater strength you have to leverage in negotiations,” notes Mayne. “You can say to a vendor that if you’re willing to accept the terms of a deal in one venue that you can help them get into other venues that you manage.”
With officials at AEG and SMG gagged during the merger process, one key unanswered question surrounds ASM Global’s business model, as its constituents operate very different strategies: while AEG invests heavily in facility construction and development, SMG has historically collected management fees to run venues.