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.
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.