A group of investors including Maroley Media Group, the investment firm of former Warner Music Group chairman/CEO Robert Morgado, has picked up an equity stake in Platinum Entertainment.
The $22.5 million deal, which also involves Alpine Equity and SK Palladin Partners, is in the form of preferred equity securities with warrants.
The cash will be used by the Chicago-based Platinum to retire debt associated with financing used for acquisitions. Platinum has made several acquisitions since its bow in 1991, including Intersound, which it bought earlier this year.
“This is a great step forward for our company,” said Steven Devick, chairman/CEO of Platinum Entertainment. “Not only because of the capital infusion, but also to add the experience of recognized music industry and financial experts to help continue Platinum’s growth.”
The pact will give Morgado’s China First Music Co., an Asian outpost established last year, product to exploit in the region.
It also gives Platinum an enhanced international presence for its coterie of labels, which also includes Rex Music, River North and House of Blues, in which Platinum owns 50%.
“When we consider making an investment, we consider three ingredients,” Morgado said. “No. 1 is the people; No. 2 is the strategic interest; and No. 3, does the company operate in a niche that gives it an advantage in a marketplace otherwise dominated by big companies? For our purposes, we concluded a strong affirmative on all three points.”
When the warrants are exercised, the investment group is expected to own almost 40% of Platinum’s outstanding shares. Platinum’s board of directors is expected to be restructured as a result of the equity partnerships.
Platinum, which has a blues record and John Denver’s last album on the sales charts, reported net revenues of $24.4 million for the 12 months ended May 31. The company reported a net loss of $9.3 million.
The investor group also consists of Mac Music, a joint venture between Alpine Equity Partners and Maroley.