Deezer: Pinault and Blavatnik wield Spac to whack Spotify

Disrupter of disrupters? Or swan music of the particular objective acquisition firm? European traders are making that decision over a deal involving music streaming service Deezer. The French group has reached phrases with money shell I2PO to listing on Euronext Paris at a pre-money worth of €1bn.

Bringing collectively billionaires François-Henri Pinault and Leonard Blavatnik, the brand new enterprise goals to seize a rising share of the streaming market. That means taking up Big Tech and Spotify, which controls round a 3rd of the market.

The deal permits an interesting comparative examine of a fevered Spac float versus the chilled, low-cost direct itemizing chosen by Spotify in 2018.

Chart showing investor contributions for music streaming service Deezer

Deezer thinks it could possibly distribute by way of third-party content material suppliers in underexploited areas. That contrasts with the direct-to-consumer mannequin pursued by Spotify, Apple and Amazon.

Record labels hoping to weaken the established order might hum alongside to this tune. Deezer chief govt Jeronimo Folgueira highlights a distribution take care of German tv channel RTL, which has its personal streaming providers.

Less positively, some Deezer distributors with bodily shops have been compelled to shut throughout the pandemic. Sales grew solely 5.5 per cent final 12 months to €400mn. In distinction, Spotify raised revenues by over a fifth to €9.7bn. The US-listed enterprise ought to make its first revenue this 12 months.

Two charts. First shows sales (annual % change) for both Spotify and Deezer, 2021 - 2025 (estimated figures for 2022 onwards). Second chart shows streaming sales (€bn) for both Spotify and Deezer, 2020-2025, (estimated figures for 2022 onwards).

Deezer gross sales progress moved into double digits in February. A goal of €1bn in gross sales by 2025 requires additional fast acceleration. Blavatnik’s cross possession of Warner Music ought to make that formidable plan simpler for Deezer to realize.

If so, shares are low cost at a a number of of about one instances 2025 gross sales or a reduction of 1 / 4 to Spotify’s valuation. The equation seems to be dear on shorter-term forecasts.

In a Spac, shareholders are usually not all created equal. Investors becoming a member of by way of a non-public putting are getting their shares at a 44 per cent low cost to these within the authentic, listed money shell. Founders get pleasure from a 90 per cent low cost. That imbalance might elevate as many questions for traders from communitarian Europe as Deezer’s courageous plan to disrupt the streaming oligopoly.

Lex recommends the FT’s Due Diligence e-newsletter, a curated briefing on the world of mergers and acquisitions. Click right here to enroll.

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