Shares of Live Nation Entertainment (NYSE: LYV) gained 13.9% in June 2018, according to data from S&P Global Market Intelligence. The event organizer and ticket vendor made a couple of small but strategic investments last month, but the biggest driver of market buzz came from analyst firm Citigroup suggesting that Sirius XM Holdings (NASDAQ: SIRI) might want to buy out Live Nation someday soon.
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Citi analyst Jason Bazinet pointed out that Sirius XM parent company Liberty Media nas been talking about the possible synergies that might arise from combining the Ticketmaster parent with Sirius XM's satellite radio services. The pairing would amount to a "vertically integrated music titan," Bazinet said, and the combination of two very different players in the music industry would face very few regulatory challenges.
The next week, analyst firm J.P. Morgan disagreed with Bazinet's conclusions in a note of its own. Analyst Sebastiano Petti noted that Liberty has been talking about synergies between Live Nation and Sirius XM before without launching a buyout bid. Petti didn't entirely write off the idea of a merger but said that a deal was unlikely to happen quickly.
Apart from the buyout speculation, Live Nation is now a majority owner of regional peers ScoreMore Shows and Red Mountain Entertainment. The company will fold these localized operators' businesses into its own event promotion and production campaigns.
Live Nation's business is humming these days, showing 15% year-over-year revenue growth and $571 million in trailing EBITDA profits. At the same time, share prices have surged a market-stomping 45% higher over the last 52 weeks. As a result, Live Nation isn't exactly on fire sale right now. Trading at multi-year high EV-to-EBITDA ratios, Live Nation's rich valuation might keep Sirius XM's merger ideas in check for a while.
So I'm siding with J.P. Morgan's analysis of the potential buyout situation. It's still no surprise to see share prices soaring on these well-supported buyout theories.
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