This time should be the right one. The music streaming platform Deezer attempted an IPO in 2015 before abandoning it at the last minute, citing “market conditions” unfavorable. I2PO, co-owned by Artemis, the holding company of the family of François Pinault – the founder of the luxury group Kering –, the investment banker Matthieu Pigasse (individual shareholder of the World) and Iris Knobloch, the ex-boss of WarnerMedia, concluded with Deezer “a definitive merger agreement” with a view to its listing on the stock exchange, on Euronext in Paris, at the end of July. The announcement was made Monday, April 18. I2PO is a SPAC, a company launched to raise funds and enter a stock market, with the project of subsequently buying an unlisted company in a sector defined in advance. In this case, entertainment.
Deezer claimed 9.6 million subscribers at the end of 2021 and a catalog of 90 million titles
Small competitor of Spotify (the world number one announced 172 million subscribers at the end of October 2021) and Apple Music (60 million in mid-2019, according to the latest figures available), Deezer claimed 9.6 million at the end of 2021, which draw in a catalog of 90 million titles. This merger operation, which should be completed at the end of June before an IPO a month later, will value Deezer at 1.05 billion euros.
“It’s not about racing with Spotify”, says Iris Knobloch, but to take advantage of the growth potential of music streaming. A flourishing market whose average annual growth rate soared by 28% between 2016 and 2020. Much more than the performance of Deezer, whose turnover only grew by 5.5% between 2020 and 2021 to reach 400 million euros. Mme Knobloch estimates that the penetration rate of music streaming subscribers should increase in France from 18% in 2020 to 30% in 2027.
Deezer is still in the red
“The combination with I2PO will accelerate the growth of Deezer, whose ambition is to achieve a turnover of one billion euros by 2025” and “to achieve operational profitability”, assures the press release. The Deezer platform, founded in 2007 by Daniel Marhely, which has become one of the first French unicorns, is still in the red, with an operating loss of 120 million euros in 2021.
Following the operation, I2PO will be renamed Deezer. “The company resulting from this merger will have access to I2PO funds, in particular those held in its escrow account opened when it was listed on the stock market, i.e. 275 million euros”, specifies the SPAC. To this will be added funds raised as part of a capital increase reserved for certain investors, of between 135 million and 150 million euros.
Most current Deezer shareholders will follow the deal. This is the case of the main one, Access Industries (which today holds 43%). The company of Len Blavatnik, an American citizen for more than forty years, born in Ukraine, also controls the world’s third major, Warner Music. In these times of stalking the oligarchs, Access Industries recently assured that Mr. Blavatnik “has no involvement in Russian politics or the Russian government. He is not currently and has never been on any US, UK or EU list of sanctioned individuals or persons subject to economic sanctions”.
Pursue the development strategy
Its stake in the capital of Deezer will be diluted, as will those of the music majors Sony, UMG, Warner Music, but also those of Orange, Kingdom Holdings, Eurazeo and Xavier Niel (individual shareholder of the World). On the other hand, new investors will arrive in the round table, such as Groupe Artémis, Bpifrance or Media Participations. The fourth French publisher, very present in comics, and already diversified in the press, audiovisual, multimedia and video games, thus signs its entry into the musical world.
All of the sums released by these financial transactions will allow Deezer to pursue its development strategy, in particular by strengthening its position internationally, in Brazil, where the group is already well established (with 2.7 million subscribers). , but also in the United Kingdom, Italy, Spain and the United States. With the idea of entering into partnerships first, such as with Orange, FNAC, SFR for example in France, but also with TIM Celular in Brazil and very recently RTL in Germany, before directly offering subscriptions to music lovers.
Jeronimo Folgueira, general manager of Deezer, is betting on innovations specific to the platform, such as very good sound quality, personalized playlists according to the mood of listeners or the possibility of translating songs to retain new subscribers. Unlike Spotify, Deezer won’t be racing for podcasts. “Our goal is to offer a very different offer from that of our competitors”he adds.
Thanks to this operation, Iris Knobloch could pocket an exceptional compensation of 2.7 million euros. Before taking over the presidency of the Cannes Film Festival to succeed Pierre Lescure in this prestigious but unpaid position in 2023.