The acquisition of BMI by New Mountain Capital, which transpired late last week, will put approximately $100-million of cash into iHeart’s balance sheet. Along with that, BMI announced that $100-million of post-sale proceeds will be distributed to music creators represented by the performing rights organization.
Before this transaction, BMI (Broadcast Music Inc.) has been owned by a consortium of media companies.
iHeart’s Windfall
iHeart plans to use the injection of cash to pay down debt, among other corporate purposes, according to Morningstar.
Announcement of the divestment spiked IHRT stock a bit, to $2.85; as of this post the stock is trading at $2.54.
Regarding the distribution of funds to music creators — the composers, songwriters, and music publishers who are BMI’s clients — BMI stated that the allocation will “be in keeping with [BMI’s] distribution methodologies, which are based on performance levels over a set period of time” according to Music Business Worldwide. Specifics of the payout plan are not announced.
Stability Amidst Change
Mike O’Neill, President and CEO of BMI, will continue in that role, and no leadership shake-up is expected.
“We are excited about the many ways New Mountain will accelerate our growth plan,” O’Neill said, “bringing new vision, technological expertise and an outstanding track record of strengthening businesses, all of which will help us build an even stronger future for BMI and our songwriters, composers and publishers.”
While these details are revealed now, the actual closing date is anticipated to be around March 30.
Some Controversy
The acquiring company, New Mountain Capital, is a private equity firm with many shareholders. One of them is Google, parent company of YouTube, which is a music streaming service that pays into BMI. Ted Gioia, an author of several music history books and co-founder of the jazz studies program at Stanford University, laid out his objections to the deal on Twitter.
“Does anybody see a conflict if the organization collecting royalties for songwriters has an owner that is supposed to pay royalties to songwriters? Would regulators let Toyota acquire the United Auto Workers? Could a tobacco company acquire the American Heart Association? Organizations like this should stay independent. That’s part of their mission. –Ted Gioia
Other voices in that conversation asked whether BMI membership was invited to comment on the proposed acquisition.
BMI has never been independent. Broadcaster’s set it up and media companies owned it.