Live Nation Talks Signatures

Live Nation held an investors meeting November 15th and had at least one big piece of news for its shareholders – the purchase of the world’s largest merch company.

The company has entered into a definitive agreement to acquire Signatures Network, with CEO Dell Furano becoming the chief of Artist Nation’s merchandise division.

Signatures holds the rights to market and license more than 150 major artists, according to a company statement, including The Beatles, U2, Bruce Springsteen, Barbra Streisand, Justin Timberlake, Ozzy Osbourne, Billy Joel, The Grateful Dead, KISS and The Doors. It also provides print-on-demand merchandising and custom manufacturing.

Live Nation is expected to acquire the company for $79 million in cash, stock and repayment of debt, before working capital adjustments. The transaction is expected to close later this year. Live Nation has already acquired merchandising company Trunk Ltd.

"This acquisition is a key component to our strategy to build a unified business around touring artists, managing their rights holistically and helping them reach their true potential," Artist Nation CEO Michael Cohl said in a statement.

It’s difficult to overstate the transaction. Signatures is the flagship merchandising company, and Furano has been the man with the plan since starting the company with Bill Graham. Wall Street reacted positively, and LYV stock, opened at $15.81, closing at $16.26.

Live Nation held its investors and analysts meeting at the Fillmore New York at Irving Plaza, featuring presentations on everything from the "integrated rights management" deal with Madonna to how merchandising works.

CEO Michael Rapino opened with a strategic review and Q&A session while Cohl followed with a talk about core expansion. Other execs scheduled to give presentations in the four-hour meeting included North American Music CEO Jason Garner, International CEO Alan Ridgeway and CFO Kathy Willard.

LN announced the deal with Madge in October, outlining plans to share future music and music-related revenue from the Madonna brand, albums, touring and merchandising, among other sources. The 360 deal is reportedly worth $120 million, with Madonna receiving an $18 million signing bonus and partial stock compensation.

The stock market wasn’t responding kindly since the announcement, though the New York Stock Exchange hasn’t been very kind to anyone recently. Live Nation’s stock price, at $22.93 as the rumors of the Madonna deal reached their zenith, sank to $15.79 in early November.

Morgan Joseph & Co. analyst David Kestenbaum said before the investors meeting that although the deal might help Live Nation attract artists, he was skeptical about Madonna’s longevity.

"We still have questions regarding returns on Madonna, specifically on her popularity, longevity and Live Nation’s related advance payment schedule for her talent," Kestenbaum wrote in a client note.

"While we do not discredit the artist’s high profile name, we are slightly cautious of her reliance on high-action, performance-oriented concerts versus an act that is more musically relevant regardless of age," Kestenbaum wrote.

Live Nation no doubt is seeking to assure the Kestenbaums among the investment and analyst group that it has all its bases covered.