Impresario Irving Azoff is preparing to strengthen his grip on the music business by preparing a bid for Warner Music’s recorded-music division via his debt-stressed Live Nation Entertainment, as first reported by The Post on its Web site.
Azoff, who is famous for representing acts including Christina Aguilera and whose Live Nation has a $120 million touring deal with Madonna, would gain control of a slew of Warner names including Bruno Mars, Cee Lo Green and Josh Groban as part of a potential billion-dollar transaction.
A combo would help both firms reduce their talent development outlays, one source told The Post. What’s more, the deal would give Azoff the cash flow his company desperately needs. Crushing interest payments are currently eating up the concert company’s balance sheet.
Live Nation’s long-term debt is $1.7 billion, leaving some on Wall Street questioning how the firm could even consider such a deal. “Wall Street will kill them for this,” said one source.
Live Nation ran into trouble last year when concert goers balked about high ticket prices and stayed home after the company swallowed Ticketmaster in a massive merger that was cleared by the feds.
So far that deal hasn’t paid off for shareholders, who’ve lost some $1.25 billion in value since last April, when the stock was worth as much as $16.70.
The stock hit its low point last August, falling to $8.43. It closed yesterday at $10; year-to-date shares are off 12.5 percent.
Warner Music’s recorded business has cash flow of $348 million, while Live Nation’s cash flow from operating activities was $158 million at the end of 2010.
Azoff’s firm, run by CEO Michael Rapino, would have to bid around $1.2 billion in order to have a chance at nabbing Warner Music, which is also being pursued by several other music companies and private-equity firms.
Warner’s owner, Thomas H. Lee Partners, Boston, is looking for a large premium. If it doesn’t get one, the plan is to pursue a merger with Citigroup-owned EMI.
EMI is expected to come to market now that its fiscal fourth quarter has ended. A book will be out within the next few weeks, sources said. Warner’s second-round bidding is expected to close in two weeks.
One source said, “Whoever is the winner of Warner’s recorded-music business, will be the winner of EMI’s recorded-music business.”
“It could make great economic sense for Live Nation,” added one person familiar with the talks. “Warner is a much higher margin business then their core venue and concert [business] and it generates more cash flow.”
Whether John Malone’s Liberty Media would fund the deal remains to be seen. Liberty boosted its stake in Live Nation to 20 percent in February.
One Wall Street source said, “Live Nation is the first deal Malone did that does not have good cash flow.”
Bloomberg News reported in February that Azoff and Malone were “on the prowl” for acquisitions. catkinson@nypost.com