Anthem Entertainment, the Canadian music company backed by the Ontario Teachers’ Pension Plan, is up for sale again, but according to sources, the company is running into the same challenges as it did when it was shopped in 2017: its hodgepodge of music assets are much tougher to monetize than traditional song catalogs.
Sources say Anthem’s financial results include about $70 million in net publisher’s share, or gross profit, and about $30 million to $35 million in earnings before interest, taxes, depreciation and amortization (EBITDA). Those sources add that investment bank Moelis & Co. is shopping the deal, seeking minimum bids of about $600 million. Moelis is also currently shopping Tempo Music.
In 2017, Anthem Entertainment, then called Ole, was first shopped by RBC Capital Markets in what turned out to be a busted auction when bidders failed to offer the $800 million price the company was seeking, in an auction that also came with a requested minimum bid threshold of $600 million. The Ontario Teachers’ Pension Plan needs Anthem to fetch at least $600 million in order to help fund the pensions of the nearly 330,00 retirees and working teachers it supports.
In the latest attempt to sell Anthem, the company and Moelis first approached prospective suitors in November 2021, but the auction came with two problems — the first being that the non-disclosure agreement that needed to be signed in order to receive Anthem’s financials was so onerous that some potential bidders passed on looking at the deal.
The other main problem is what stymied the deal the first time around. Back then, Ole, as it was then known, had $57 million in net publisher’s share and $35 million in EBITDA. But at the time, almost 50% of its revenue came from TV, film and other audio-visual secondary rights, while 30% came from production music and 5% came from a small catalog of master recordings (Anthem owns the Rush catalog through acquiring the band’s Anthem Entertainment, which later allowed them to be rebranded with that name). That meant that only about 17% of its revenue came from traditional song publishing royalties from songs by the likes of Rush, Timbaland and Steven Tyler. Generating revenue for production music is work-intensive and consequently, it just doesn’t trade, nor achieve, the high multiples and valuations that traditional song catalogs realize.
By 2018, the company, founded in 2004, had already poured some $540 million into making acquisitions and at that time controlled a catalog of 55,000 songs and 60,000 hours of TV/film music. With the departure of founder Robert Ott after the failed auction, former Warner Group CFO Helen Murphy was hired as CEO, and since then Anthem has been working hard to up the traditional song publishing component. Among other subsequent deals under Murphy, Anthem acquired 50% of Wrensongs; bought a song catalog from the Boardwalk Music Group; and acquired the Kelly Archer song catalog, which includes such country hits as Travis Denning’s “After A Few” and Justin Moore’s “Somebody Else Will,” both of which hit No. 1 on Billboard’s Country Airplay chart, and Brett Young’s “Sleep Without You,” which reached No. 2.
Still, sources say that the mixed bag of revenue sources might be hard to digest for some traditional potential bidders, particularly the institutional investors. Others say that how Anthem classifies some production music revenue as NPS could leave questions in the minds of some suitors. Additionally, some of its acquired operations, like Jingle Punks and Compact Media, may not fit into the investment strategies of the many pure equity financial institutions that have come into the industry seeking investment returns on song catalogs.
Last year, Anthem obtained a $550 million credit line from a consortium of banks that included traditional music lenders like Truist, Fifth Third Bank and Pinnacle. That line had two components — a $400-million revolver and a $150-million accordion –which provides additional funds above the $400 million if needed.
In its latest move to sell Anthem, sources say Moelis is going back to some of the suitors that initially passed on looking at the deal, possibly with a lightened NDA.
But another source suggests that with an asset of this size, scale and complexity, it sometimes takes time to find the right home and get a deal done.
Anthem and Moelis didn’t immediately respond to requests for comment.
