Warner Music Group expands with Tempo Music stake

NEW YORK - Warner Music Group Corp. (NASDAQ:WMG), a $16.7 billion market cap music entertainment company with annual revenues exceeding $6.4 billion, has acquired a majority interest in Tempo Music Investments, a premium music rights investment platform, with Providence Equity Partners retaining a minority stake. The deal, announced today, sees WMG bolster its portfolio with a catalog that includes works by acclaimed artists and songwriters. According to InvestingPro analysis, WMG has demonstrated solid growth with revenue increasing 6.4% over the last twelve months.

Tempo, established in partnership with Providence in 2019, has built a diverse portfolio of music rights, focusing on empowering artists and songwriters. The acquisition by WMG is expected to be increasingly accretive over time as additional rights revert to Tempo, enhancing WMG’s administration and distribution capabilities. WMG maintains a moderate debt level and has consistently raised its dividend for five consecutive years, currently offering a 2.2% yield.

Warner Chappell’s Co-Chair and CEO, Guy Moot, expressed enthusiasm for the acquisition, citing the expansion of Warner Chappell’s reach and the addition of rights from both new and existing partners. Michael Ryan-Southern, WMG’s EVP and Chief Corporate Development Officer, emphasized the alignment of interests and the deal’s fit with WMG’s investment strategy to build scale and influence.

Providence’s Michael Dominguez recognized the quality of Tempo’s catalog and the close partnership with WMG, looking forward to supporting Tempo’s growth. Tempo’s acquisitions include rights from Tyler Joseph of Twenty One Pilots, Wiz Khalifa, Florida Georgia Line, as well as GRAMMY® Award winners like Brett James and Shane McAnally.

Moelis (NYSE:MC) & Company and Weil, Gotshal & Manges LLP advised Tempo and Providence on the transaction. The acquisition is part of WMG’s broader strategy to invest in high-value music rights and follows a trend in the industry of increasing interest in music catalogs as long-term investments.

This strategic move by Warner Music Group is based on a press release statement and represents an expansion of its music publishing arm, Warner Chappell Music, through the addition of a significant number of music rights from top artists and songwriters. For deeper insights into WMG’s financial health and growth prospects, including 8 additional ProTips and comprehensive valuation metrics, visit InvestingPro, where you’ll find detailed analysis in our exclusive Pro Research Report.

In other recent news, Warner Music Group has been a focal point of multiple analyst reviews due to foreign exchange (FX) pressures. UBS lowered the company’s stock price target from $43.00 to $41.00 but maintained a Buy rating. The firm expects Warner Music Group’s sentiment to improve by 2025, driven by subscription growth and potential gains from a premium tier introduction. However, UBS anticipates recent FX movements could impact short-term trends and management’s guidance for a 100 basis point improvement in margins.

Guggenheim also adjusted its stance on Warner Music Group due to FX challenges, reducing the 12-month price target to $40 from $44 while maintaining a Buy rating. The firm expects a 1.5% foreign exchange revenue drag in the first fiscal quarter and a 1.7% drag for the full fiscal year. Despite these challenges, Guggenheim remains optimistic about the company’s mid-to-long-term prospects.

In other developments, Warner Music Group has amended the employment agreement with its CEO, Robert Kyncl, transitioning his annual performance-based compensation to restricted stock units from performance share units. Loop Capital, on the other hand, has reduced the company’s stock price target from $38.00 to $35.00 while maintaining a Hold rating, reflecting the firm’s outlook on the company as it embarks on management changes aimed at reinvigorating its recorded music growth.

Lastly, Goldman Sachs has reduced the price target for Warner Music Group from $40.00 to $37.00, while maintaining a Buy rating. The firm identified a slowdown in Recorded Music Subscription Streaming and Ad-supported Revenue growth but expects the company to continue seeing margin expansion and robust Free Cash Flow conversion.

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