Electronic dance music festival company SFX Entertainment has agreed to be taken private by its colorful chief executive, Robert Sillerman, less than two years after its initial public offering.
In a deal that values the company at about $490 million, SFX said Tuesday that Sillerman would pay $5.25 a share in cash for the 62.6% of SFX's outstanding stock that he does not already own. That's 27% higher than the closing share price Friday.
The offer also represents a 10% boost from the $4.75 a share Sillerman first offered in February, a price many investors and analysts considered too low. The company valued Tuesday’s total deal at $774 million, including the assumption of $256 million in debt.
SFX shares rose nearly 20%, or 82 cents, to $4.94 on Tuesday.
Sillerman founded SFX in 2012 to capitalize on the burgeoning market for electronic dance music and live events. SFX went public in October 2013, at $13 a share. The stock has since plummeted as the company — which promotes music festivals including Electric Zoo, Mysteryland and Tomorrowland — has continued to post big losses.
SFX reported a loss of $131 million in 2014 on $354 million in sales. In the first quarter of 2015, the company lost $41.5 million.
Some Wall Street analysts were surprised that Sillerman boosted his bid. Still, Albert Fried & Co. analyst Richard Tullo, who had called Sillerman’s previous bid an “insult,” judged the new offer as “more fair” to investors.
He said taking the company private is the right move in the long run.
“One of the things you do with failed public corporations is take them private, clean them up and then take them public again,” Tullo said.
SFX, which competes with Beverly Hills-based touring giant Live Nation and Los Angeles-headquartered AEG, has grown by aggressively rolling up festival businesses. The company in November took a 50% stake in tour producer Alda Events, after buying Monumental Productions, the producer of Awakenings Festival, in September. It also owns Beatport, a streaming platform for DJs and dance music fans.
But the company has not fared as well as investors had hoped.
Sillerman, who amassed a fortune in radio before getting into the live events space, has attracted attention for some of his less-than-traditional behavior as the head of a public company. Notably, he dropped profanity on an earnings conference call last year after photos surfaced online showing the CEO making obscene gestures while getting off an airplane.
SFX, as part of its agreement with Sillerman, has 45 days to shop around for a better deal. The company said that it planned to “actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals,” and Sillerman agreed to vote in favor of any superior bid received with a value at least 2.5% greater than his highest offer.
Tullo, the Albert Fried & Co. analyst, said there’s a 20% chance that a competing bid would emerge during the window.
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