AceShowbiz - Primary Wave is in advanced talks to acquire Kobalt Music Group, a move that would create an independent music powerhouse with over $7 billion in combined assets, according to Billboard estimates.

Primary Wave's portfolio, valued at nearly $6 billion, includes stakes in the catalogs of major artists like Prince, Whitney Houston, Bob Marley, and Britney Spears. Kobalt, the world's largest independent music publisher, was valued at around $750 million when it was acquired in 2022 by investors led by Francisco Partners. Under CEO Laurent Hubert, Kobalt has since grown, improved profitability, and launched a $700 million investment joint venture with Morgan Stanley's Tactical Value group.

Sources indicate these efforts have resulted in Kobalt generating roughly $100 million in EBITDA (earnings before interest, taxes, depreciation, and amortization). The company could now command a sale price exceeding $1.5 billion, especially if assets from the Morgan Stanley partnership are included. Goldman Sachs is reportedly advising Kobalt on the potential deal.

All companies involved declined to comment or did not respond to requests.

Francisco Partners holds a controlling 90% interest in Kobalt. Other stakeholders include Dundee Partners, Matt Pincus, and Kobalt founder and chairman Willard Ahdritz. After selling assets to BMG in 2013 and later to Hipgnosis Songs Fund in 2020, Kobalt resumed acquiring music rights under Francisco Partners' ownership through its Morgan Stanley partnership.

This joint venture has acquired rights related to catalogs from artists like *NSYNC and AJR, as well as from various songwriters. These assets are believed to be highly leveraged and may not appear on Kobalt's consolidated financial filings with the U.K.'s Companies House.

For its part, Primary Wave has become a dominant force in buying music rights since its own reboot, owning catalogs from artists such as Stevie Nicks, James Brown, The Notorious B.I.G., and John Mellencamp. However, it has relied on third-party companies like Universal Music Publishing Group for publishing administration and collection services.

Acquiring Kobalt would give Primary Wave its own powerful administration platform. Crucially, it would also own Kobalt's AMRA, a global collection organization that collects royalties directly from digital services. This would allow Primary Wave to bypass fees paid to local societies, improving profitability for its publishing assets.

A further benefit for Primary Wave would be gaining a stake in the music catalogs Kobalt has acquired since 2022 through its Morgan Stanley partnership. While Kobalt has been quiet on specifics, sources say it has been actively buying publishing catalogs and some master recording rights.

Kobalt also operates KOSIGN, a service providing publishing administration to independent artists and songwriters—a growing sector where it competes with companies like Songtrust and Word Collections.

Financially, Kobalt's recent filings show a loss of $30.24 million on revenue of $794.4 million for the year ending June 30, 2024, compared to a $13.1 million profit on $522 million revenue the prior year. The loss is attributed to nearly doubled administrative expenses and increased finance costs. However, sources contend that Kobalt's operating profit under U.S. accounting principles is strong and that the company has grown significantly more profitable in recent years.