Believe looks to take music group private less than 3 years since IPO

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The founder of digital music company Believe is teaming up with two investment firms in an attempt to take the company private less than three years after listing in Paris. 

Denis Ladegaillerie, Believe’s founder and chief executive, has partnered with private equity firms EQT and TCV, the company’s largest shareholder, to offer €15 in cash per share to outstanding shareholders in a deal that values the company at about €1.52bn — a 21 per cent premium to Friday’s closing price. 

Founded in 2005, Believe has billed itself as a new breed of music label for the streaming era that helps smaller, independent artists maximise earnings on streaming platforms and boost their visibility internationally. Its initial public offering in 2021 had sought to capitalise on investors’ growing enthusiasm for the music sector, which enjoyed a return to growth thanks to the rise of streaming platforms like Spotify and Apple Music.

But Believe’s atypical business model and competition from traditional big labels have made investors wary, and the share price was trading about 30 per cent below the IPO price before Monday’s announcement. Most of Believe’s revenues come from its premium service for more established artists, but unlike traditional music labels, the musicians keep control over their copyright and pay Believe a share of revenue.

“Since being a public company, Believe has systematically outperformed its objectives, delivering its IPO plan two years ahead of schedule. However the strength of its operational performance has not been reflected in the share price evolution,” said Ladegaillerie in a statement. 

The consortium of Ladegaillerie and the private equity firms said on Monday that they had already made agreements to acquire 72 per cent of the French label’s share capital from existing shareholders. They also have backing from shareholders representing another 3 per cent of the share capital to tender them at the offer price. 

The tender offer will be filed in the second quarter after the transaction receives approval from regulators and Believe’s board, which supports the offer. If they gain backing from holders of 90 per cent of the share capital, the consortium will be able to squeeze out remaining shareholders and remove the company from the public market. 

Believe works with about 1.3mn independent musicians and various music labels to boost their popularity on social media and streaming platforms, in 50 countries and with more than 150 different streaming providers including Spotify, YouTube, Apple Music and Amazon. 

As its revenue has grown steadily, so have operating expenses, keeping the group in the red. It increased sales by 32 per cent to €760mn in 2022 and posted an operating loss of €22mn.

Goldman Sachs has estimated revenues for the total music streaming market at about $38bn in 2023.

This post was originally published on Financial Times

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