Live Nation, Ticketmaster merger official

Deal worth an estimated $2.5 billion

The announcement the music industry has been waiting for has come: a definitive merger agreement between Live Nation and Ticketmaster to create Live Nation Entertainment.

The move combines Live Nation, the world's largest concert promotion firm, with Ticketmaster's industry dominating ticketing company, also bringing into the fold the numerous artist and venue relationships encompassed by both companies. The merger also scuttles one of the most well-known names in live entertainment in Ticketmaster.

The companies will be combined in a tax-free, all-stock merger of equals with a combined enterprise value of approximately $2.5 billion. Under the agreement, Ticketmaster shareholders will receive 1.384 shares of Live Nation common stock for each share of Ticketmaster they own, subject to certain adjustments defined within the agreement.

Live Nation and Ticketmaster shareholders will each own approximately 50% of the combined company. According to the announcement, the new company anticipates generating approximately $40 million of operating synergies through the combination of their ticketing, marketing, data centers and back-office functions. The merger agreement was approved by both companies' boards of directors.

Here are the canned quotes from three of the principles in the deal:

Barry Diller, chairman of Ticketmaster Entertainment, said, "It was less than two months ago that Ticketmaster ended its 10-year partnership with Live Nation, and I'm extremely glad we could reunite with this combination. No different from any other industry, the challenges are all around every aspect of live entertainment. Being able to put Live Nation and Ticketmaster into an equal partnership will allow the companies to get through this difficult period and be able to expand live entertainment options to audiences throughout the world."

Michael Rapino, CEO of Live Nation, said, "This combination will drive measurable benefits to consumers and accelerate the execution of our strategy to build a better artist-to-fan direct distribution platform. As every industry observer knows, too many tickets go unsold and too many fans are frustrated with their ticket-buying experiences.

"The current inefficiencies in the system result in higher costs and confusion over access to seats. Together, we will work to simplify the ticketing process and ultimately increase attendance at live events. This is also a logical step in the evolution of our business model, creating a more diversified company with a stronger financial profile that will drive improved shareholder value over the long term."

Irving Azoff, CEO of Ticketmaster Entertainment, said, "This merger, and the resources of these combined companies, will create a new dynamic and unique creative platform of choice for fans across all levels of the live entertainment experience. There is nothing more magical than the bond and the intimate relationship of fans to artists. It is truly an experience that needs to be embraced and nurtured with both integrity and respect. One of the mandates of the combined company will be to develop that bond to unsurpassed levels.

"Additionally, the Live Nation and Ticketmaster relationship will allow the live entertainment community and their respective venues to reach fans on unparalleled platforms. I look forward to working closely with Michael Rapino and the Live Nation team during this exciting and industry changing time."

The announcement did not detail the structure of the new company, but a source at Live Nation said that Michael Rapino will be CEO/president and will run Live Nation Entertainment day-to-day, reporting to a board of directors. Irving Azoff will be executive chairman of Live Nation Entertainment and CEO of Front Line, Ticketmaster Entertaiment's management division, and the two will jointly steer Live Nation Entertainment's major strategic decisions.

The future of Ticketmaster Entertainment President/COO Sean Moriarty and Ticketmaster chairman Terry Barnes are two big questions, as is how smoothly the corporate culture of the two companies will mesh. Insiders said that since Ticketmaster acquired Front Line earlier this year, placing Azoff at the helm of the newly-named Ticketmaster Entertainment, the Front Line culture has become more influential in both internal and external dealings, and Azoff's answer to complaints from the Bruce Springsteen camp's frustrations last week lend credence to that.

Opposition is likely to come from competitors in the concert promotion and ticketing worlds. Anti-trust issues could well loom, Live Nation/Ticketmaster are sure to point out that the two companies currently only compete in the realm of ticketing, with Ticketmaster being larger by far. Ticketmaster is not a promoter. Live Nation is not a manager, but they have secured long-term multirights deals with some of the biggest artists in the world.

Several industry players have expressed concern about the deal."These people that are now afraid of this new monolith helped create it," said D.C. independent promoter Seth Hurwitz, president of I.M.P. "This one party system was created by people who thought that they were the 300 pound gorilla, only to find out now that there is a 600 pound gorilla out there."

Others are less concerned. "Our business is evolving and this is another step in that," said Peter Luukko, president of Comcast-Spectacor and chairman of Global Spectrum, the Philadelphia-based venue management firm.

"If you're combining ticketing, artist management, touring and the like, I think it makes sense. This will give them the ability to take more risks with building acts and developing acts and complete service to those acts. And it should be good from a building standpoint."

Another challenge could come from German businessman Klaus-Peter Schulenberg, executive board chairman at CTS Eventim, Live Nation Ticketing's partner in launching its own global ticketing company. Live Nation is contracted with CTS for the latter to provide ticketing services in North America and Europe, and CTS executives can't be happy hearing that their longtime rival might be coming on board at Live Nation.

Insiders doubt Ticketmaster and CTS could mesh, so CTS would have to be reckoned with. Schulenberg could not be reached at phone by press time and did not respond to an e-mail.

Representatives from Live Nation Entertainment could not yet be reached for comment.