UPDATE 3-Live Nation to buy Ticketmaster, faces scrutiny
* Live Nation to pay $400 mln in stock for Ticketmaster
* New York senator slams deal
* Shares of both companies fall on antitrust concerns
* Companies expect deal close in second half of 2009 (Adds executive comments, analyst reaction)
By Yinka Adegoke
NEW YORK, Feb 10 (Reuters) - The world's largest concert promoter, Live Nation Inc (LYV.N), plans to buy Ticketmaster Entertainment Inc TKTM.O for about $400 million in stock, aiming to create a company with dominant holdings in concert promotion and ticket sales.
But shares of both Live Nation and Ticketmaster fell on Tuesday, amid concerns the acquisition would be blocked by U.S. antitrust regulators under the new Obama administration.
U.S. Senator Charles Schumer slammed the deal ahead of its formal announcement, calling for a federal probe into Ticketmaster, the top U.S. ticket vendor.
"This merger would give a giant, new entity unrivaled power over concert-goers and the prices they pay to see their favorite artists and bands," the Democrat senator from New York said in a statement.
The merged company, Live Nation Entertainment, would have more than 140 concert venues globally that sell 140 million tickets annually and host 22,000 concerts a year.
It would also manage a client roster of more than 200 big-name artists including Madonna, Jay-Z, Miley Cyrus and the Eagles -- thanks mostly to Ticketmaster's acquisition of Front Line Management Inc last year and Live Nation's own efforts to sign on big stars by paying top dollar.
"It's not going to be easy to get approval, though in a vacuum it's a good combination that extends what Live Nation's been trying to do by diversifying," said David Joyce, analyst at Miller Tabak.
Ticketmaster shareholders will receive 1.384 shares of Live Nation common stock for each share of Ticketmaster, the two companies said in a joint statement. Live Nation will own 49.99 percent of the combined company, while Ticketmaster will hold the remaining 50.01 percent.
Live Nation Chief Executive Michael Rapino will run the new company as CEO while Ticketmaster CEO Irving Azoff will be executive chairman. Ticketmaster Chairman Barry Diller will be nonexecutive chair. Diller's IAC/InterActiveCorp (IACI.O) spun off Ticketmaster as a stand-alone company last August.
The companies called the deal a merger of equals and said it would create a firm with an enterprise value of $2.5 billion including debt. They expect the deal to close in the second half of 2009, assuming they receive regulatory approval.
But news of the deal has already raised questions with regulators, fans, artists and record labels who believe the new company will have too much power over the live music business.
Just weeks earlier, U.S. President Barack Obama had taken office pledging to toughen antitrust enforcement.
And last week, Connecticut Attorney General Richard Blumenthal said he would look into allegations that Ticketmaster worked with an online subsidiary to inflate prices for tickets to see a Bruce Springsteen concert in New Jersey.
Diller said on a conference call that ticket buyers had been redirected to another website with higher prices because of a "computer glitch." He also called Schumer's statements "factually untrue."
Live Nation and Ticketmaster see their combination as a way to drive event attendance and insulate themselves from the recession. They expect to save about $40 million by combining their ticketing and back-office functions.
The two companies had a 10-year ticketing relationship until Jan. 1, when Live Nation ended it in order to introduce its own service. Profit margins in the touring business are around 4 to 5 percent, while ticketing margins are as high as 25 percent.
"Together our revenue opportunities can produce a far better return on investments than either company can do on its own," said Rapino. "The better job we do of getting the right fans in the right seats at the right time, the more money our clients are going to make."
Live Nation, which owns marquee name venues like House of Blues and the Gibson Amphitheatre in Los Angeles, has been trying to diversify its business in the last 18 months. It has signed top artists like Madonna and Jay-Z to multifaceted deals including touring, digital and recording rights.
Live Nation shares fell 7.56 percent to $4.89 in late-afternoon trading on the New York Stock Exchange. Ticketmaster dropped 6.09 percent to $6.19 on Nasdaq.
Based on Ticketmaster's 57.21 million shares outstanding as of Nov. 7, the deal values the company at $403 million. Based on Monday's closing prices, the deal values Ticketmaster at an 11 percent premium. (Editing by Derek Caney, Tiffany Wu, Richard Chang) (e-mail:email@example.com Reuters Messaging: Yinka.firstname.lastname@example.org; +1 646 223 6081) (Click here to see Reuters MediaFile blog)
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