HoB Nixes Concerts Sale

House of Blues Entertainment, following weeks of speculation that a deal to sell off its concerts and amphitheatre division was imminent, announced April 13th that it is dropping efforts to shed those assets and will continue operations as usual.

In December, House of Blues retained the services of global financial services firm UBS Investment Bank to assist in evaluating overtures made by potential HoB buyers. That fueled sale rumors the company feels can now be properly quashed.

“During the last year, we have forged positive synergies between Clubs and Concerts, and I am optimistic about the future of the concert industry as a whole,” House of Blues Entertainment CEO Greg Trojan told HoB staff in an internal memo obtained by Pollstar.

“I believe that the supply and demand dynamics of the concert industry bode well for our business going forward, and the benefits of operating large concert and club venues in a market outweigh the benefits of a club-only strategy.”

According to Trojan, the company has decided to focus on club / large venue synergies in markets where HoB has a strong brand presence. He used San Diego as an example.

“We’re going to open in San Diego in May with a great amphitheatre, a great history in the market, a great outside promotions business and we’re going to add a club to that,” Trojan told Pollstar.

House of Blues San Diego debuts in May, and Coors Amphitheatre in nearby Chula Vista, Calif., was gearing up for another season starting in late April.

Among the large venues under the HoB umbrella are The Gibson Amphitheatre (formerly Universal) in Los Angeles; Gorge Amphitheatre in George, Wash.; Coors Amphitheatre near Denver; The Molson Amphitheatre in Toronto; the operating lease on the Blossom Music Center near Cleveland; and joint ownership interest with Clear Channel in the HiFi Buys Amphitheatre in Atlanta and the Smirnoff Music Centre in Dallas.

The decision not to sell HoB Concerts marks the second time in as many years that a major division of the House of Blues enterprise was the subject of acquisition rumors before the company announced it was not for sale.

It retained a firm in 2002 to do a similar evaluation of the entire company – including the club operations side – before deciding to withdraw from sale consideration.

The Wall Street Journal reported HoB was looking for offers in the $110 million to $120 million range for its concerts division. Sources familiar with the situation told Pollstar that prospective bidders were told not to even bother making an offer for less than $100 million. About a dozen companies, including AEG Live, SMG, and a group led by Fred Rosen reportedly took a good look at the opportunity but, in the end, there was said to have been only two serious bids.

Clear Channel Entertainment, at around $90 million, was the top bidder, sources said, with the Nederlander Organization‘s offer a little short of that.

HoB bought what was then known as Universal Concerts from Seagram Co. for $190 million in 1999. The investment bankers behind the purchase had planned to mimic Robert Sillerman’s SFX rollup and recoup their investment with an IPO. HoB was in the process of arranging an IPO when the stock market bubble burst and the IPO effort had to be withdrawn.

It should be noted that Trojan insists that House of Blues Concerts was never really for sale in the first place.

“We said all along, from day one, we’re not looking out there to sell the business.” Trojan told Pollstar. “We didn’t have a ‘For Sale’ sign on it and hire UBS. It was people coming to us and saying, ‘Look, there’s a lot of growth in the club business and, obviously, you’re spending a lot of capital and attention on that side of the business. Are you interested in selling Concerts?’

“We said no for quite a while. Ultimately, when those calls became more persistent, we decided we should evaluate and make sure we’re making the right decision about not pursuing a focused club strategy. And that’s what we did.”

In the end, the CEO insists, it all came down to a simple analysis of what was best for the company and its investors – and that was to keep House of Blues Concerts intact.

“I’m passionate about it because that really is what happened,” Trojan said. “It’s almost too straightforward for some people. We said all along we were going to make an evaluation and I’m happy to say we’re keeping the business and we’re very enthusiastic about the upcoming season.”

To that end, it will be “business as usual” and the current staff at HoB Concerts is “absolutely” staying put, according to Trojan. Concerts division chief Alex Hodges, who had been expected to leave if a sale went through, was still with HoB following the non-sale announcement.

The recent departure of Jim McCue from the Denver office was part of a restructuring there that was “totally independent of all that,” Trojan said. “We’re still running our business in a way that we can adjust and do the right thing, and we both came to that conclusion. It had absolutely nothing to do with this process.”

HoB continued to make personnel moves and business deals, including the recent naming rights deal with Gibson Guitar Co. at Universal Amphitheatre in Los Angeles, during what could have been considered uncertain times before the non-sale announcement.

In addition to the new club opening in San Diego, another is under construction in Atlantic City, N.J. Earlier this year, House of Blues announced a $110 million recapitalization, intended to finance additional club locations in the near future.

“I took the attitude, and told people internally from the outset, that we’re going through this process to figure it out. There’s as good a chance – if not better – that we would continue to operate and we’re going to operate as if we’re going to be together for a long, long time. And we did that,” Trojan said.