MEDIA

SFX Reaches $774 Million Deal for Founder to Take Company Private

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The Rock in Rio USA festival in Las Vegas this month. SFX reduced its earnings forecast for the year to reflect up to $5 million in losses related to the festival. L.E. Baskow/Reuters 
SFX Entertainment, a company started to capitalize on the popularity of dance music festivals, has reached a $774 million deal for its founder, Robert F.X. Sillerman, to take the company private, less than two years after its initial public offering.
SFX announced Tuesday that Mr. Sillerman, the chairman and chief executive, who controls 37.4 percent of the company, would acquire the shares he does not already own for $5.25 each in cash — 50 cents a share higher than Mr. Sillerman had initially offered in February, and a 42 percent premium over the share price on Feb. 24, the day before his offer was made public.
The deal values SFX at less than half its price when the company went public in October 2013 at $13 a share, reflecting a difficult run as the company expanded rapidly yet continually lost money. SFX, whose portfolio includes festivals like Electric Zoo, Tomorrowland and Rock in Rio, and the online music store Beatport, reported $52 million in revenue and nearly $42 million in net losses for the first quarter.

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This month the company also reduced its earnings forecast for the year to reflect up to $5 million in losses for the $75 million inaugural edition of Rock in Rio USA, the American branch of the long-running Brazilian festival, which drew mixed reports in the news media and had far from sellout crowds.
SFX, which competes with major concert presenters like Live Nation Entertainment and AEG Live, started in 2012 as a vehicle for Mr. Sillerman — a 67-year-old media mogul who first made his fortune in radio in the 1980s — to return to the live music world. In the 1990s, Mr. Sillerman transformed the concert industry from a largely regional business into one that was national and consolidated through the first incarnation of SFX, which he sold in 2000 to the broadcasting company Clear Channel and which is now the basis of Live Nation’s concert division.
Since returning, Mr. Sillerman has proved himself one of the concert world’s more colorful characters. Last year Wall Street was briefly puzzled when images appeared on social media showing Mr. Sillerman making obscene gestures; he later said the images were intended only as a private joke within the company.
Mr. Sillerman’s offer to take SFX private was approved unanimously by the company’s board, according to an announcement. As part of the deal, SFX will have a 45-day “go shop” period in which alternative proposals will be accepted.
Richard Tullo, an analyst at Albert Fried & Company who was critical of Mr. Sillerman’s initial offer, said on Tuesday that he thought there was a 20 percent chance a higher bid could emerge from other bidders. But “given the recent history of disappointing results,” he said, “we think the $5.25 bid with the opportunity to participate in the equity is a fair deal.”