Warner Music Group has today (November 17) announced to investors that it is raising $535 million via a senior secured notes agreement.
That is, obviously, reasonably big news. But it’s what WMG intends to do with this money that will doubtlessly get the global business a-chattering.
According to a fresh SEC filing spotted by MBW, Warner intends to “use the net proceeds of the offering to fund a portion of the aggregate cash consideration for potential acquisitions by [WMG] of certain music and music-related assets”.
So: Why would Warner suddenly want to add over half a billion dollars to its cash pile to buy something? And what acquisition opportunities might there be in the marketplace that would trigger such a move?
Bloomberg reported the other week that 300 is currently “exploring a sale” for around $400 million. It’s worth noting that the US-headquartered indie – home to Megan Thee Stallion and Young Thug, amongst others – is a long-term partner of WMG/Atlantic Records.
Perhaps, though, Warner is looking at an even bigger fish.
Persistent whispers in the market suggest that Concord – which works across recorded music, music publishing, and theatricals – may be sold by its majority owner, Michigan Retirement Systems, should it be able to find a buyer willing to match a multi-billion dollar price-tag.
Obviously enough, Warner’s $535 million debt raise won’t get WMG to that multi-billion dollar price-tag… and a full acquisition of Concord appears simply too rich, even when this $535 million is combined with the $442 million WMG had in cash/cash equivalents on its balance sheet at the close of June 2021.
Maybe Warner is instead looking at a blockbuster artist/songwriter catalog acquisition?
The Financial Times recently rumored that the David Bowie song catalog might be up for grabs for a price-tag in the region of $200 million.
Another possibility is that Warner may spend its money growing its international presence.
Investors in public music companies such as WMG are putting their faith in the growth of music revenues in so-called “emerging” markets, and Warner has a strong track record of making acquisitions far beyond the United States and Europe.
Could the $535 million be used to snap up a valuable asset in Latin America, Asia, the Middle East, Africa, or elsewhere?
One more possibility: just yesterday MBW reported that Warner has made a heck of a return from its eight-figure investment in Roblox already… and is busy making yet more investments in the gaming space.
Could Warner use its new $535 million cash influx to buy into a non-music tech entity? Perhaps one operating in and around the metaverse?
In the ‘plus’ column for this idea: Warner boss Steve Cooper has often discussed Warner’s desire to diversify its revenue streams beyond mere music rights.
In the ‘less likely’ column: Warner’s SEC filing regarding today’s raise specifically says the money is intended to be spent on “music and music-related assets”.
Which direction is this story going to go?
MBW will bring you the answer, as soon as we have it.
Earlier this week, Warner Music Group confirmed its revenues for the quarter ending September 30, 2021.
Across all divisions (record plus publishing etc.) WMG generated $1.376 billion in the period, which was up 22% year-on-year.Music Business Worldwide