Live Nation/HoB Update

In the largest acquisition of its kind since SFX Entertainment roamed the earth, Live Nation announced July 5th it has agreed to acquire House of Blues Entertainment for roughly $350 million in cash in a deal expected to close by year-end.

“The transaction covers the entire company,” House of Blues Entertainment CEO Greg Trojan told Pollstar.

The deal not only leaves Live Nation in control of all but a scant few of the nation’s major amphitheatres but fills in some routing gaps on its shed itineraries.

Among the pick-ups from HoB Concerts are Coors amphitheatres near San Diego and Denver; Smirnoff Music Centre in Dallas; HiFi Buys Amphitheatre in Atlanta; The Molson Amphitheatre in Toronto; Blossom Music Center in Cuyahoga Falls, Ohio; Gorge Amphitheatre in George, Wash.; and the indoor Gibson Amphitheatre At Universal CityWalk in Los Angeles.

It also gives LN a firm toe-hold in the national nightclub market with branded House of Blues clubs in West Hollywood and Anaheim, Calif.; San Diego; Chicago; Las Vegas; New Orleans; Orlando; Atlantic City; Cleveland; and Myrtle Beach, S.C.; The list will grow to include clubs under construction in Philadelphia, Dallas, Houston and Seattle.

With the consolidation, Live Nation will control Coors Amphitheatre and City Lights Pavilion in Denver, in addition to promoting a large number of shows at city-owned Red Rocks Amphitheatre. Live Nation – Denver‘s Chuck Morris declined to comment on the future of Coors Amphitheatre (formerly Fiddler’s Green) after The Rocky Mountain News reported that the property might be redeveloped.

The deal also includes HoB Canada, though Live Nation did not buy out Molson’s half share of the concern north of the border, LN CEO Michael Rapino told Pollstar.

The news came as a surprise to many concert industry observers, because HoB Concerts removed itself from the market a year ago. But it reportedly also was a surprise to HoB employees who had not even an inkling talks were under way until they came to work the morning of July 5th to find an internal memo from Trojan attempting to soften the blow.

“I know this comes as a surprise to all of you,” Trojan wrote. “When [Live Nation] approached us, frankly, we were not looking for a buyer. However, as I have mentioned to you in the past, our Board has a fiduciary responsibility to our shareholders – and to our business – to consider any such approach.”

Trojan explained that in the coming weeks, “our senior executive team and I will be working through issues of transition.” In addition, he told HoB employees that he and Rapino would form a joint transition committee to prepare the company for its new incarnation.

“We have great respect for the House of Blues employees and what they have accomplished and we look forward to welcoming them into the Live Nation family,” Rapino said in a statement.

Still, there will be a certain amount of overlap among talent buyers and management ranks. As for the directorships of both Live Nation and HoB, none of the latter’s present board is being invited to join the LN board of directors, according to Rapino, including Trojan or co-founder Dan Aykroyd.

“We do look forward to Dan being part of the business going forward,” Rapino said.

House of Blues Entertainment will retain its name after the expected merger.

And Aykroyd certainly seems pleased with the turn of events. “This configuration will be a great fit for the growth of the brand originated by myself and Isaac Tigrett in 1994,” the erstwhile Blues Brother said in a statement. “Although my own capital investment will not quite be the bonanza which my advisors might have hoped for, the important thing is that the majority of our 2,000 employees will now be assured of a bright future in a well-funded company poised for exciting expansion.”

But despite the seeming abruptness of the deal, talks had been under way for several months. A Securities and Exchange Commission filing revealed that the two companies entered a confidentiality agreement relative to the negotiations March 30th.

That House of Blues would eventually be sold was never in doubt as the company has been courting potential buyers for several years.

“It wasn’t a surprise to us; we knew that they’d been negotiating something for the past three months or more,” AEG Live CEO Randy Phillips told Pollstar. “So we were prepared for this. We did due diligence and we did come up with a number, but it was for House of Blues Concerts only.”

Trojan would not confirm reports that the highest bid for HoB Concerts in 2006 was somewhere south of $100 million.

“The difference in that discussion was that folks approached us about buying the concerts business. When we refer to ‘concerts,’ that’s the amphitheatre side of our business,” Trojan said. “So whatever values we’re talking about then, they weren’t talking about a transaction encompassing the entire company; it was just for the amphitheatre assets.”

Reactions in the industry ranged from “business as usual” to speechlessness. “You’ll have to call me back in a day or two while I give this some thought,” one independent promoter told Pollstar.

Phillips, who helms the second-largest – and now the only other giant – concert promotion company in the land, was predictably not impressed with the merger and blunt in his assessment.

“We don’t think consolidation is good for the industry,” Phillips said. “My feeling on this is that the consolidators and global dominance score one point, and the consumer and the artist zero in this scenario.

“I always thought the industry was healthier even before [AEG] existed. When you had local promoters in all the markets with their own businesses, they were hungrier and it was healthier than the environment that exists today.

“That said, thank God we even exist. Because if we weren’t here, there would be nothing between [Live Nation] and dictating to the industry,” Phillips said.

Many industry observers who spoke to Pollstar questioned if the acquisition would open the antitrust issue anew for Live Nation, three months after the U.S. Department of Justice announced it was no longer investigating such questions after the Clear Channel Entertainment spinoff.

A DOJ attorney told Pollstar that whether it would open another investigation will depend on a review of the Hart-Scott-Rodino (HSR) filing required when companies merge and the acquisition cost is more than a certain dollar amount. “This one certainly is,” the lawyer said. “One of the purposes of the form is to alert federal regulators that this merger is going forward. If there is perceived to be any competitive problems, then you try to work that out. That’s just a general view of how the antitrust laws work.

“You take a look at the two companies that are merging and you look to see if there are any anticompetitive issues,” the attorney explained. “It usually does raise, spatially, some concerns. Whether it’s legitimate has to be determined later on.”

In other words, CCE’s previous entanglement with the DOJ will have nothing to do with Live Nation’s attempt to acquire HoB, which will be considered an entirely separate issue once LN files its HSR forms.

“It sure gives them just about every amphitheatre in the country,” Jam Productions President Jerry Mickelson told Pollstar. “I mean, it’s just more consolidation. When you consolidate, that’s what happens.”

Nederlander CEO Adam Friedman, who came to the company recently from HoB, is one person who may well be working more closely with LN than he might have previously anticipated: Nederlander and HoB have a co-management arrangement at the Greek Theatre in Los Angeles.

“I don’t see this as anything other than status quo from a viewpoint of day-to-day operations,” Friedman told Pollstar. “We view Live Nation as a partner as well as AEG and others when we do business with them. We’re going to do what’s within our power to expand those relationships.

“If it’s Live Nation or House of Blues or AEG, we look at it from the viewpoint of what the opportunity is and not what the moniker is,” Friedman concluded.

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.

Since then, the question has been when would the bankers decide a purchase offer would meet their nut and a sell-off would be green-lighted.

– Deborah Speer