Mood Media Corporation  (ISIN: CA61534J1057) (TSX:MM/ LSE AIM:MM), a leading in-store media specialist has just announced it has entered into a definitive agreement to acquire Muzak Holdings  LLC (“Muzak”), a privately-held company that is one of the leading providers of sensory branding services for business in the United States, for US$345 million including net debt to be repaid on closing.
Based in Fort Mill, South Carolina, Muzak provides a full range of brand enhancing products. Its top-tier background and foreground music, voice and digital offerings reach more than 100 million people every day. In 2010, Muzak had US$195 million in revenue and US$55 million in EBITDA. More than 75 percent of Muzak’s revenue is associated with multi-year customer contracts.
Mood Media’s acquisition of Muzak will create a global in-store media provider servicing over 470,000 commercial locations in over 39 countries. In the U.S., the combined business will serve over 200,000 national and 100,000 franchisee locations. The combined customer base will include more than 850 U.S. and international brands in diverse market sectors that include retail (food, fashion, cosmetics), leisure and hotels, oil and gas, telecommunications, financial institutions, and fast food. Together Mood Media and Muzak will have an extensive music library that includes 1.7 million rights-included tracks and more than 30,000 original recordings, which means customers will benefit from greater product choice.
The combined company will have trailing last twelve months (LTM) pro forma revenue of approximately US$400 million and trailing LTM pro forma EBITDA in excess of US$100 million. Over 60% of the combined company’s revenue will be recurring subscription revenue, with a new contract life of three to five years.
Lorne Abony, CEO & Chairman of Mood Media Corporation told us “This acquisition creates a new global leader with the geographic footprint, top-tier brand relationships and track record of innovation to compete and succeed in a dynamic marketplace. Over the past five years, Mood Media has transformed the in-store media industry by offering unparalleled innovation and convenience to our customers across the world. We now have the opportunity to extend this legacy to a world-recognized brand and create a truly global leader with U.S. headquarters in the Charlotte area. We see attractive opportunities for profitable growth through cross-selling Mood Media’s products to Muzak’s existing customers, expanding into adjacent markets and adjusting Muzak’s distribution system to our industry-leading internet-based technology.”
Steve K. Richards, Chief Executive Officer of Muzak said “We are delighted to join together with Mood Media, an innovative global leader that is revolutionizing the consumer experience. This combination will offer sophisticated new and expanded solutions and opportunities for our customers and employees. As part of Mood Media, we will continue delivering unique experiences to millions of people daily.”
Mood Media intends to maintain a significant presence in the Charlotte, North Carolina area, with its U.S. headquarters in Fort Mill, South Carolina.
Mood Media will finance the transaction with approximately US$480 million of debt, including the refinancing of Mood Media’s existing debt. The financing commitment is comprised of a US$25 million 5-year revolving credit facility (unfunded at close), US$390 million 7-year first lien term loan and a US$65 million 7.5-year second lien term loan. Subject to certain provisions, the credit facilities allow Mood Media to raise incremental senior secured term loans of up to $100 million. Credit Suisse Securities (USA) LLC provided the committed financing for the transaction. The acquisition will be immediately accretive to Mood Media shareholders.
The consideration for the acquisition, which is expected to close during the second quarter, is to be satisfied on completion as to (i) approximately US$305 million in cash, (ii) by the issue of US$5 million 10% convertible unsecured subordinated debentures having an exercise price of US$2.43 per common share and maturing on October 31, 2015, and (iii) as to remainder, by the grant of warrants to purchase 4,407,543 common shares of Mood Media (representing approximately 3% of Mood Media’s fully diluted common shares), at an exercise price of US$3.50 and expiring five years from the date of issuance. Further consideration of a maximum of up to US$30 million in cash may be paid over the three years following closing in the event Mood Media achieves certain minimum EBITDA targets during such period. The acquisition remains subject to customary closing conditions.