Muzak sells to Mood Media in $305M cash deal

March 24, 2011 by Dave Haynes

Fresh off the news wires comes word that Toronto-based Mood Media Corp. has done a deal to buy Muzak Holdings LLC for $305 million in cash.

Fort Mill, S.C.-based Muzak just got out of Chapter 11 bankruptcy last year.

“It’s an incredibly complementary acquisition, minute one,” Mood Media Chief Executive Lorne Abony said in an interview with the Wall Street Journal.

Though based in Toronto, Mood has a larger presence in Europe, doing background music and digital signage services for more than 117,000 retail sites. This deal puts the company’s global footprint at a staggering 470,000 commercial locations.

Muzak  does background music for about 300,000 U.S. locations, so this deal clearly gives Mood access to a large, well-established client base.

In addition to the up-front cash, the purchase price includes a $30 million earn-out and $10 million in warrants and convertible debentures, for a total of $345 million. Muzak will retire its existing debt as part of the deal.

Though local, I don’t know Mood well (though I think they had three folks at the Preset mixer and I had a brief chat with them). I do know Muzak better and have watched as the company has tried to get more and more into this space, starting perhaps three years ago. They have some software partners like Brightsign and Scala, but I think it’s fair to say their combined audio/screen offer hasn’t so far captivated the marketplace.

Details of the deal include the following notes:

Mood Media’s acquisition of Muzak will create a global in-store media provider servicing over 470,000 commercial locations in over 39 countries. In the U.S., the combined business will serve over 200,000 national and 100,000 franchisee locations. The combined customer base will include more than 850 U.S. and international brands in diverse market sectors that include retail (food, fashion, cosmetics), leisure and hotels, oil and gas, telecommunications, financial institutions, and fast food. Together Mood Media and Muzak will have an extensive music library that includes 1.7 million rights-included tracks and more than 30,000 original recordings, which means customers will benefit from greater product choice.

The combined company will have trailing last twelve months (LTM) pro forma revenue of approximately US$400 million and trailing LTM pro forma EBITDA in excess of US$100 million. Over 60% of the combined company’s revenue will be recurring subscription revenue, with a new contract life of three to five years.

“This acquisition creates a new global leader with the geographic footprint, top-tier brand relationships and track record of innovation to compete and succeed in a dynamic marketplace,” said Lorne Abony, CEO & Chairman of Mood Media Corporation. “Over the past five years, Mood Media has transformed the in-store media industry by offering unparalleled innovation and convenience to our customers across the world. We now have the opportunity to extend this legacy to a world-recognized brand and create a truly global leader with U.S. headquarters in the Charlotte area. We see attractive opportunities for profitable growth through cross-selling Mood Media’s products to Muzak’s existing customers, expanding into adjacent markets and adjusting Muzak’s distribution system to our industry-leading internet-based technology.”