LN, TM File Merger Proxy

Live Nation and Ticketmaster Entertainment jointly released a preliminary proxy to shareholders June 15, outlining details of its proposed “merger of equals” for a vote at an unspecified future date.

The document gives an advance peek at what the merged Live Nation Entertainment, as it will be known, might look like assuming regulators give the go-ahead for the tie-up and shareholders approve.

It also provides background on the negotiations leading up to the announcement of the intent to merge, as well as how the proposed merger may affect agreements with companies including CTS Eventim and Anschutz Entertainment Group.

In the run-up to the Feb. 10 announcement of the merger proposal, documents filed with the Securities and Exchange Commission show that the board of directors of Ticketmaster Entertainment, shortly after its own spinoff from IAC and acquisition of Irving Azoff’s Front Line Management were completed, met to review the company’s operations and business plan. Azoff was named Ticketmaster Entertainment CEO after the Front Line acquisition.

From those meetings in November and early December 2008, it was agreed to explore strategic alliances with unnamed companies.

At about the same time, Azoff met with Live Nation CEO Michael Rapino and LN’s EVP of mergers and acquisitions John Hopmans, while Ticketmaster board chairman Barry Diller and Randall Mays, his counterpart at LN, spoke by phone. On Dec. 18, the two giants entered into a confidentiality agreement and began due diligence investigations. By February 2009, the news was public.

Both parties continue to aim for completion of the merger in November.

After it’s completed, the combined company – which will dump the Ticketmaster brand and be known as Live Nation Entertainment – is expected to have about $1.6 billion in total debt outstanding and $1.1 billion of stockholders’ equity.

Potential hurdles for stockholders, according to the document, include possible adverse effects that depend on what CTS and AEG choose to do. CTS could terminate its long-term agreement with Live Nation, or LN may be required to “take action or incur additional expenses” following the merger.

The document also warns shareholders that AEG “has indicated its belief that any transaction involving Live Nation and Ticketmaster Entertainment would permit it to unilaterally terminate the ticketing agreement” for primary ticketing of AEG venues.

Also of interest in the filing is the breakdown of current executive perks and salaries, particularly given that Live Nation announced losses of $102.7 million in the first quarter of 2009 while Ticketmaster Entertainment posted a 78 percent drop in earnings for the same period.

Rapino, who is expected to retain the position of president and chief executive officer of the combined company, currently earns an annual base salary of $1.5 million, target bonus of the same amount, performance bonus of yet another $1.5 million and a one-time stock option grant during 2009 covering 2 million shares of LN common stock.

Azoff’s current employment agreement includes a $2 million annual Front Line salary (he receives no base salary from TME) and equal bonus, and a termination clause that includes 100 percent vesting of 1 million shares of restricted common stock worth $35 million to the Azoff Family Trust if he leaves without “cause” or “good reason.”

If he dies, becomes disabled, resigns for “good reason” or is otherwise terminated for “cause,” he may vest stock with a reported market value approaching $80 million and tax payments covered to the tune of about $13 million. According to the SEC filing, discussions for future compensation should the merger close are ongoing.

The deal also provides salaries and perks for Azoff family members and a reported $229,563 from Ticketmaster in 2008 to ATC Aviation, owned by Azoff, for the use of a plane.

Other eyebrow-raising tidbits buried in the filing include provisions for Terry Barnes and Michael Cohl.

Barnes, according to the filing, has continued to serve as chairman of Ticketmaster Entertainment, although as an at-will employee at an annual salary of $750,000. And despite his sudden departure from the Live Nation board early last year, Cohl received a salary of $5.25 million in 2008.