“Finally, the big surprise to me this day is what happened with I don’t know if you saw, the British authorities dropped their objections to the proposed Live Nation and Ticketmaster.” – CNBC’s The Call 12/22/2009
Today, a regulatory commission in the United Kingdom reversed course on the proposed merger of the world’s largest concert promoter and the largest ticket seller. Last February Live Nation (LYV) offered to buy Ticketmaster (TKTM) for about $400 million in stock, but since then the deal has drawn intense scrutiny from various antitrust authorities and consumer advocates. Obviously, the concern is that the combination of these two companies would reduce competition and increase prices to concert ticket buyers. The decision released this morning out of the U.K. shows that their analysis does not see the deal as anticompetitive. One key element to their ruling is a contract that Live Nation already has in place with Ticketmaster competitor CTS Eventim to provide ticketing software and services in the U.K., which will be honored even after a deal closes.
This is just one hurdle that the deal will need to clear, as it still faces challenges in both the U.S. and Canada. The deal faces opposition among some politicians, musicians, and music fans; those opposed to the deal have created a united front to block the deal which spawned a website called ticketdisaster.org. The website clearly lays out the opposition argument that this will increase the control over pricing and fees by these two entertainment industry giants. Furthermore, they claim it will allow Ticketmaster to push smaller ticket brokers out of the way, and their recommendation is that the deal be blocked out right instead of allowed with certain conditions.
Both Live Nation and Ticketmaster are seeing higher prices on the ruling out of the U.K. Our methodology suggests that Live Nation is currently Fairly Valued. We do not rate Ticketmaster yet, as it has only been a public company for just about 16 months. One thing to be aware of, Ticketmaster’s stock has seen substantial appreciation since the deal was announced and the market cap is nearly 80% higher than the offered acquisition price. So, if the deal does eventually pass the regulatory tests, Live Nation will need to put more money on the table to acquire Ticketmaster, but there is no need to speculate on that unless the deal receives approval.