UNIVERSAL MUSIC GROUP ACQUIRES MINORITY STAKE IN CHORD MUSIC PARTNERS
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Insights
The acquisition of a minority stake in Chord Music Partners by Universal Music Group (UMG) represents a strategic investment with potential long-term growth implications for UMG. The valuation of Chord at US$1.85 billion, with UMG's stake costing US$240 million, suggests confidence in the enduring value of music IP. The deal enables UMG to expand its portfolio and leverage Chord's high-quality catalog, which includes works from globally recognized artists.
From a financial perspective, the investment is significant but not overbearing for UMG, given its size and financial capacity. The transaction structure, combining leverage and partner equity capital, is crafted to minimize the direct capital allocation by UMG while still allowing for future catalog acquisitions. This could potentially enhance UMG's earnings and diversify revenue streams, particularly in the lucrative music publishing and recorded music sectors administered through UMPG and VMG, respectively.
For investors, the key metrics to watch will be the return on investment and how effectively UMG can integrate and manage Chord's assets. The deal could also signal a bullish outlook on the music industry's growth prospects, suggesting a favorable environment for UMG's stock performance in the mid to long term, contingent on broader market conditions.
The strategic partnership between UMG and Dundee Partners, combined with the acquisition of a stake in Chord Music Partners, underscores a growing trend in the music industry towards consolidation and control of music rights. As streaming continues to dominate music consumption, owning a vast and diverse catalog of popular music can provide a competitive edge in negotiations with streaming platforms and in generating consistent revenue from licensing and royalties.
The music IP market has seen increased interest from investment firms and private equity, as evidenced by KKR's initial involvement and subsequent exit from Chord. This trend reflects a broader shift in recognizing music rights as a stable and potentially lucrative investment class, particularly as digital consumption expands globally.
It is also important to consider the potential for synergy between UMG's existing operations and Chord's catalog. The ability to cross-promote, reissue, or create new revenue streams from Chord's IP could result in increased market share and influence for UMG in the music industry. Stakeholders should monitor how effectively UMG capitalizes on these synergies to gauge the impact of this partnership on the market landscape.
The structure of the deal, which involves a combination of leverage and partner equity, is designed to be efficient for future acquisitions, suggesting a proactive approach to expanding UMG's music rights portfolio. This implies a legal framework that supports dynamic growth strategies while minimizing risk exposure for UMG.
With the involvement of multiple legal advisors, including international firms, the transaction's legal due diligence appears to be thorough, ensuring compliance with various jurisdictions' regulations. This is critical given the global nature of music rights management and the need to navigate different copyright laws.
Legal expertise will continue to be crucial in the administration of Chord's extensive catalog. The management of over 60,000 music copyrights requires meticulous attention to copyright law and the potential for legal challenges. UMG's ability to manage these rights effectively will be essential for realizing the full value of the investment and mitigating any legal risks associated with the administration of intellectual property on such a large scale.
Joins with Dundee Partners to form long-term strategic partnership for management and acquisition of world-class music IP
UMG to globally administer publishing and distribute recordings for Chord's existing catalogs, with more than 60,000 music copyrights
KKR to sell its majority stake in Chord to current shareholder Dundee Partners and its investor consortium with a minority stake held by UMG
Chord, which was formed in 2021 by KKR and Dundee Partners, is a pure-play catalog of premier music intellectual property (IP). Chord's portfolio includes works from many of the world's most iconic artists and songwriters, including The Weeknd, Ryan Tedder/OneRepublic, David Guetta, Lorde, Kid Cudi, Diplo, Jimmy Jam & Terry Lewis, Ellie Goulding, ZZ Top, John Legend, Twenty One Pilots and many more.
UMG and Dundee Partners will enter into a new long-term strategic partnership to actively manage Chord's rights through UMG's global network and to acquire additional catalogs via Chord in the future. Chord's music publishing rights will be administered through Universal Music Publishing Group (UMPG) and recorded music through UMG's Virgin Music Group (VMG).
Sir Lucian Grainge, Chairman and CEO of Universal Music Group said, "Finding partners who share our passion for identifying iconic songs and recordings that will stand the test of time and deliver long-term growth is essential, which is why we're so pleased to be working with Stephen and Sam Hendel and Dundee Partners. With the leadership of Jody Gerson at UMPG, Nat Pastor and JT Myers at Virgin, and the support of our experienced creative executives around the world, no one can do more with music rights than our teams. We look forward to creating maximum commercial and creative value for the songwriters and artists in Chord and building for the future."
Boyd Muir, Universal Music Group's Executive Vice President, Chief Financial Officer and President of Operations said: "We're excited to partner with the Hendel family in Chord for a number of reasons. First, KKR and Dundee have built a very high-quality catalog that will benefit from our first-rate management and global capabilities. Second, this new structure provides us with an efficient vehicle for future catalog acquisitions, without significant capital allocation through a combination of leverage and partner equity capital. And finally, it offers us the perfect partner to approach future growth opportunistically and flexibly, one who is equally bullish on the long-term prospects for music."
Sam Hendel, Dundee Partners' Managing Principal and Co-Founder of Chord, said: "We're thrilled to be partnering with Universal Music Group and embarking on this next exciting chapter for Chord. By combining a best-in-class financial acquisition vehicle with the world's leading music company, we are creating both a premier platform for music investment as well as a permanent home for premier artist's legacies and their iconic cultural works. We'd like to thank the team at KKR for their partnership and creating a strong foundation for Chord and its future success."
"We are grateful to have had the opportunity to collaborate with many leading artists and to create significant value for our investors by building Chord into a differentiated and scaled portfolio. We believe that Dundee and UMG will drive further value creation for artists and that they share our commitment to being respectful stewards of artists' music," said Jenny Box, Partner, KKR.
KKR will exit Chord upon completion of the transaction, with the Dundee consortium and UMG owning
As a leader in music-based entertainment, UMG is positioned and resourced to manage and drive growth for Chord's existing rights catalogs, while UMG and Dundee Partners are both aligned in their long-term vision for the acquisition, management and growth opportunities for significant, timeless music-rights catalogs.
UMG was advised by Goldman Sachs, Kirkland & Ellis LLP and Freshfields. DLA Piper and Axinn, Veltrop & Harkrider LLP served as legal advisors to Dundee. Fifth Third Bank, National Association served as financial advisor and provided committed financing to Dundee and UMG. The Raine Group served as exclusive financial advisor and Manatt, Phelps and Phillips, LLP served as legal advisor to Chord Music Partners. Latham & Watkins LLP. served as legal counsel to KKR.
About Universal Music Group
At Universal Music Group, we exist to shape culture through the power of artistry. UMG is the world leader in music-based entertainment, with a broad array of businesses engaged in recorded music, music publishing, merchandising, and audiovisual content. Featuring the most comprehensive catalogue of recordings and songs across every musical genre, UMG identifies and develops artists and produces and distributes the most critically acclaimed and commercially successful music in the world. Committed to artistry, innovation, and entrepreneurship, UMG fosters the development of services, platforms, and business models in order to broaden artistic and commercial opportunities for our artists and create new experiences for fans. For more information, visit www.universalmusic.com.
About Dundee Partners
Dundee Partners is the investment office of the Hendel family and has a long history of unwavering dedication to the promotion of arts and culture. The family is proud of its decades-long support for theater and notably were lead producers of the Broadway hit "Fela!". In addition to co-founding Chord Music Partners, Dundee is the majority owner of Knitting Factory Entertainment, Partisan Records, and Kino Lorber. Beyond those endeavors, the family continues to make strategic investments at the intersection of music and technology, shaping industry and cultural evolution.
About KKR
KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR's insurance subsidiaries offer retirement, life and reinsurance products under the management of Global Atlantic Financial Group. References to KKR's investments may include the activities of its sponsored funds and insurance subsidiaries. For additional information about KKR & Co. Inc. (NYSE: KKR), please visit KKR's website at www.kkr.com. For additional information about Global Atlantic Financial Group, please visit Global Atlantic Financial Group's website at www.globalatlantic.com.
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SOURCE Universal Music Group N.V.
FAQ
What stake did Universal Music Group (UMG) acquire in Chord Music Partners?
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