LN Acquires Balance Of Front Line

Live Nation Entertainment has acquired virtually all of the remaining equity stake of Front Line Management Group, the company founded by newly minted LNE Chairman Irving Azoff and Howard Kauffman.

Live Nation also announced a shakeup in its board of directors that leaves Azoff in the chairman’s seat, sees the departure of Liberty Media chief John Malone, welcomes Liberty CEO Greg Maffei, and a cash sale of 1.8 million shares of LYV to Liberty Media.

The Front Line acquisition represents a total consideration of $116.2 million in cash and stock. It includes the equity interest in Front Line formerly held by Azoff and Madison Square Garden and closed Feb. 4.

The cash portion of the transaction totaled $56.5 million and was funded with cash on hand, according to a Live Nation statement. The remaining $59.7 million was paid using newly issued shares of LN common stock. Of the common stock issued, Azoff received 1.8 million shares and MSG received 3.9 million shares.

Front Line will be consolidated into LNE for U.S. federal income tax purposes.

“Through this transaction we will further simplify and consolidate our operating structure,” LNE CEO Michael Rapino said in a statement. “By acquiring full ownership of Front Line, we expect to benefit from substantial savings related to cash taxes, the elimination of the dividend and operating synergies resulting in an increase in our free cash flow in excess of $20 million annually.

“Front Line is a tremendous asset and a key component of our live entertainment and marketing platform. We look forward to Irving’s ongoing contributions as we continue to focus on increasing the growth potential of our combined operations.”

Front Line Management Group has acquired as many as 120 management companies over the last few years under the leadership of Azoff and Kauffman. Front Line and its affiliates are home to more than 250 clients including Eagles, Neil Diamond, Jimmy Buffett, Christina Aguilera, Kenny Chesney, Fleetwood Mac and Journey and 90 executive managers. However, many in the industry have expressed concern about putting so many artists and venues in the hands of one company.

But the acquisition isn’t Live Nation’s only news of the day. The company also announced several changes to its board of directors, including the naming of Azoff as its Chairman, a role most recently filled by the departed Barry Diller. Azoff previously served as executive chairman.

It’s not clear what prompted the departure of Malone, but worth noting that Diller – who was considered a rival by many – officially resigned from the board only one week prior.

Malone may be off the board, but Liberty Media will continue to play a strong role on the board. Liberty CEO Greg Maffei now joins the LNE board and has been named chairman of Live Nation’s newly formed Executive Committee.

In a separate deal, LN also announced that it has sold 1.8 million shares of LYV common stock for $18.8 million in cash.
Liberty also agreed to purchase an additional 5.5 million shares of common stock for consideration of $57.7 million in cash, subject to approval of Live Nation’s stockholders. That vote will take place at the company’s 2011 stockholders meeting.

“Liberty’s investment in Live Nation will enable us to further strengthen our balance sheet and provide us with additional financial flexibility as we execute our growth strategy,” Rapino said.