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Blackstone Buys Music Rights Organization SESAC

Overview

Blackstone (NYSE: BX) has entered into an agreement to acquire SESAC, a leading music rights organization, from Rizvi Traverse Management on January 4, 2017. SESAC is the only US-based music rights organization that administers public performance, mechanical, synchronization and other rights within a single company. SESAC’s 30,000 affiliates include songwriters and musicians in the industry including Bob Dylan, Neil Diamond, RUSH, Charli XCX, Zac Brown, Mumford & Sons, Lady Antebellum, Mariah Carey, Axl Rose, Shirley Caesar, and Robin Thicke. Deal for SESAC is the first investment out of Blackstone’s new $5 billion fund with a fund-life of ~10 years which is longer than its typical leveraged buyout funds.

Purchase price is not disclosed. DealBook has run a back-of-the-envelope LBO math on the deal after it was announced.

  • In 2013, Rizvi Traverse bought 75% stake at $600 million valuation against $40 million EBITDA (15x EBITDA multiple)
  • By 2015, EBITDA was roughly $60 million; applying the same multiple, implied purchase price of $900 million ($60 x 15x)
  • Assuming debt/cap of 50%, equity check of $450 million and $450 million of debt balance
  • Assuming continued EBITDA growth in the mid-to-high single-digit range, say 7%, EBITDA would double to $120 million in a decade
  • At the same 15x exit multiple and with no change in debt, Blackstone would triple its equity value by 2027 for a 12% annualized return without any interim dividends

Allen & Company acted as financial advisor and Akin Gump acted as legal advisor to SESAC. Moelis and AGM Partners acted as financial advisors and Kirkland & Ellis acted as legal advisor to Blackstone. Goldman Sachs acted as financial advisor to Rizvi and Jefferies is providing debt financing related to the transaction.

History

Rizvi Traverse bought a 75% stake in SESAC at a $600 million valuation in January 2013. At the time, SESAC had compounded a 5-year CAGR of 13%. Original investors include Stephen Swid, Allen & Co., Freddie Gershon, and Ira Smith who bought SESAC in 1992 for $15 million. In 2010, 36% stake was sold to Och-Ziff at a $410 million valuation.

Blackstone is a global private equity, alternative asset management and financial services firm co-founded by Stephen Schwarzman and Peter Peterson in 1985. Blackstone is one of the largest private equity investment firms in the world and in 2007, completed a $4 billion IPO. Past and current investments include SunGard, La Quinta Inns, Hilton Hotels, Equity Office, Michaels, Nielsen, The Weather Channel, Dynegy, Versace, and many others.

Rizvi Traverse, a private equity fund co-founded by Suhail Rizvi, invests in media, telecommunications, and entertainment sectors. Prior and current investments include Twitter, Facebook, Flipboard, Square, Playboy, RealD, SpaceX, Snapchat, Key Air, ICM, and many others.

Image Source: SESAC

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