_{DEAL OF THE MONTH}

Royalty Riches

A consortium led by New Mountain Capital agreed to acquire Broadcast Music Inc. (“BMI”), which represents Lady Gaga, Taylor Swift, and Rihanna, among others.

So what exactly is New Mountain acquiring for some undisclosed price? BMI owns the public performance rights of 20+ million musical works created by over 1.3 million songwriters, publishers and composers.

Essentially, this means New Mountain will own the rights to collect royalties whenever these songs are played publicly, rights which BMI has previously obtained from the artists themselves in exchange for an initial payment.

Royalties of any kinds are great sources of cashflow given there is limited variability, and typically no costs associated with them. All of the costs associated with a royalty business are basically overhead costs to keep the business running and capital to acquire new royalties, making it a high margin business.

The flip side of these high margin businesses is they typically sell for high multiples. This could explain why New Mountain has chosen not to reveal the sale price, as the valuation multiple might be quite substantial.

Following the closing of the deal - expected in Q1’24 - BMI’s current shareholders will set aside $100 million of the proceeds from the sale for its songwriters and partners. This payout is structured as an earnout and will be based on performance over a set timeframe.

This deal has been met with some concern from songwriters and publishers, BMI has acknowledged that this is inline with their existing growth plans: (1) to grow distribution; (2) invest in new technologies to improve royalty collections; (3) add new revenue streams through organic growth and M&A opportunities.

Goldman Sachs advised BMI and Moelis advised New Mountain. Additionally, CapitalG (affiliated with Alphabet) will also pick up a passive minority stake in the business as a co-investor.

_{PRESENTED BY MAG CAPITAL PARTNERS}

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_{TIS’ KIM K’S WORLD}

SKKY Drives a TRUFF Bargain

Kim Kardashian’s fund SKKY Partners has made its first investment, 14 months post-launch.

SKKY acquired a significant minority stake in in the sauce brand TRUFF, which is a truffle-infused sauce brand that spans hot sauce, pasta sauce, mayo, oil and salt.

TRUFF’s co-CEOs will remain as management and will also retain a significant equity stake in the company. Additionally, SKKY is adding three people to the board, including former CEO of Sir Kensington’s sauce brand and former CEO of premium chocolate brand, Hu, in addition to one SKKY managing director.

TRUFF’s flagship hot sauce remains the leading seller in the natural channel and the fastest-growing hot sauce in the conventional grocery. The brand has also landed several B2B alliances - recent partnerships include Popeyes, Hidden Valley Ranch, Taco Bell, and the Super Mario film. TRUFF's products are available in over 20,000 U.S. retail outlets, such as Whole Foods, Target, Kroger, and Publix.

Given SKKY’s experience with consumer brands and branding knowledge, this will be a good test to see how much value they can drive through their branding expertise above and beyond their financial engineering to generate returns. (Kim K has already started posting IG stories for them though so that’s a good sign)

There is plenty of blue SKKY opportunity here, so we wish them all of the best with their first investment.

_{EXIT OF THE MONTH}

The Biggest Deal You’ve Never Heard Of

If you want to ask yourself how slept on the coal market is, think about the fact that this may be the first time you are hearing about a $9.0 billion deal.

Teck Resources, a top Canadian miner, is known for its high-quality coking coal used in steelmaking. Facing lower valuations typical for coal entities (2-3x EBITDA), Teck sought to rebrand as a more valuable copper company (6-7x EBITDA).

Teck's strategy included separating its coal division into a new public entity while retaining most of the cash flow. This move prompted Glencore, a global mining giant, to propose a comprehensive buyout, citing synergies and operational consolidation opportunities.

Glencore's offer, though initially unfruitful, led to a competitive bid from Asian Steel Mills. However, the consensus was that Glencore would likely prevail at the right price.

The deal concluded with Glencore acquiring 77% of Teck’s coal business for $6.9 billion, with Nippon Steel and Posco buying the rest for $2.1 billion, a mere 3.0x the coal segment's average adjusted EBITDA.

Despite mixed feelings among Teck's dividend-enjoying shareholders, the sale is seen as beneficial for both companies.

If we had to predict the future, we’d say keep your eyes out for a Glencore Coal company listing in ~2yrs, which may not trade well but will provide significant capital returns to shareholders every year.

_{NEWS ROUNDUP}

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