Live Nation Entertainment has told its shareholders that it has officially pulled out of an agreed acquisition of a majority stake in Latin America’s largest live music promoter.
The US company was set to acquire a 51% stake in Mexico-based OCESA for a cash price exceeding $400m. The joint sellers of the stake were the Inter-American Entertainment Corporation (Corporación Interamericana de Entretenimiento, or CIE) and Televisa Group (TV), a media giant in the Spanish-speaking world.
According to an SEC filing from summer 2019, Live Nation entered into a definitive agreement to acquire 51% of OCESA for a purchase price of MXN $8.835bn (approx $462m), with MXN $7.93bn (approx $414m) to be paid in cash.
Mexican regulators, after an initial hold-up, approved the buyout in April this year.
However, Live Nation confirmed in an SEC filing today (May 26): “Live Nation had entered discussions with CIE and TV regarding potential modifications to the timing and terms of the acquisition, but the parties have been unable to agree on modified terms.”
This wouldn’t have been a great surprise to Live Nation investors. CEO and President Michael Rapino said on an earnings call earlier this month that Live Nation was looking to delay payment for the deal amid the current global pandemic.
Rapino said on May 7 that “we are, long term, still bullish on [OCESA’s] business and ours”, adding: “We want to be in business with OCESA and get the deal done.”
However, he added: “I’m not looking to take on any losses from Mexico while they’re going through their six or eight months of business downturn [due to COVID]… Ideally, we want to get the deal done. We want to delay the cash payment of the deal until we both know how and when we’re on the other side of this crisis. So that’s the intent.”
Live Nation warned investors today, however, that it anticipates both CIE and TV may “pursue any legal remedies available to them to enforce the terms of their respective Purchase Agreements”.
In its statement today, Live Nation continued: “On May 25, 2020, Live Nation notified CIE that it was terminating the CIE Purchase Agreement as a result of CIE’s failure to comply with its contractual obligation to continue operating the Target Companies in the ordinary course of business and the occurrence of a Material Adverse Effect (as that term is defined in the CIE Purchase Agreement). Live Nation simultaneously notified TV that it was terminating the TV Purchase Agreement, which agreement may be terminated if the CIE Purchase Agreement is terminated for any reason.
“Live Nation has commenced binding arbitration proceedings, seated in New York, New York, before the International Court of Arbitration of the International Chamber of Commerce, seeking a declaratory judgment that it has properly terminated the CIE Purchase Agreement and that any obligations thereunder are excused on the grounds set forth above, among others.
“Live Nation anticipates that CIE will defend these arbitration proceedings and that both CIE and TV may pursue any legal remedies available to them to enforce the terms of their respective Purchase Agreements and contest the validity of their termination.”
Live Nation confirmed last week that it has raised $1.2bn in additional debt, via the sale of secured notes. Rapino said the money would provide “extra cushion to withstand any scenario well into 2021”, as LN continues to see what long-term effect the 2020 global pandemic will have on its business.Music Business Worldwide