Reservoir Holdings, which owns Reservoir Media, is going public on the Nasdaq stock exchange through a reverse merger with a special purpose acquisition company (SPAC) with the apparent aim of gaining cash and lowering the cost of capital. It is the first standalone publishing company to go public on a US stock market.
Reservoir will form a business combination with Roth CH Acquisition II (currently trading on Nasdaq under the ticker symbol ROCC) and when the deal closes during the third quarter, the combined company will be called Reservoir Media but with a new ticker, RSVR , according to an announcement released by the music publishing company on Wednesday, April 14, after markets closed.
Golnar Khosrowshahifounder and CEO of Reservoir, will lead the new combined company, with her current management team consisting of president and COO Rell Lafargue and financial director Jim Heindlmeyer.
Roth CH Acquisition II contributes $115 million to Reservoir’s public offering as part of the agreement. Some institutional investors, including Caledonia, have been named as major shareholders, which will bring in $150 million in gross proceeds.
Ultimately, after investment banking, legal fees and other expenses, Reservoir will end up with $246 million in gross proceeds from the transaction. The company’s current shareholders, including the Khosrowshahi family, will transfer all of their tank capital to the new company, giving it an enterprise value of $788 million.
That means Reservoir shareholders will likely have a lock-up period — possibly 180 days — before they can cash in on any of their shares. In the meantime, the company has a pro forma implied value of $740 million at $10 per share, according to the announcement, which further implies that it also has a net debt of $48 million.
This deal will provide Reservoir with a lower cost of capital in the fast-paced, high-stakes world of music asset trading, allowing it to follow Hipgnosis’ business strategy of finding music assets to acquire and then tapping into the markets. public to finance the agreements. It also allows existing Reservoir shareholders to potentially realize some of the value they have created through the shares they will hold in the new vehicle. But, initially, the liquidity of the tank’s shares will be limited by a float of $115 million worth of shares.
“Today we have taken an important step in the evolution of Reservoir to fully realize this vision through our partnership with Roth CH II,” Khosrowshahi said in a statement. “Our dedication to our songwriters and artists and their music is at the heart of everything we do, and this path to growth supports our promise to serve our customers, increase value and build a quality catalog. I am immensely proud of what we have built alongside President and COO Rell Lafargue, and our incredible team whose excellent skills, top-notch customer service and exceptional track record are second to none.
Reservoir’s catalog includes music from 2 Chainz, A Boogie Wit Da Hoodie, A-Ha, Ben Harper, Big & Rich, Bob Crewe, David Guetta, Evanescence, Hoagy Carmichael, Ja Rule, John Denver, Kurt Elling, Leon Ware, Lil Jon, Migos, Molly Hatchet, Rickie Lee Jones, Scott Storch, Scott Stapp, Seether, Sheryl Crow, Stewart Copeland and Willie Mitchell.
The company says it has rolled out more than $400 million in catalog acquisitions — including recently acquiring the catalog of independent music publishers Shapiro Bernstein — since its inception, and spent an additional $100 million on frontline creative signings. . The company says it also owns 26,000 sound recordings and its management business handles more than 60 clients.
“We are thrilled to partner with Reservoir and their outstanding management team,” according to a statement released by Roth Capital and Craig-Hallum, sponsors of Roth CH II. “Reservoir has built an exceptional collection of hit songs and soundtracks in its music publishing and masters businesses, and has a unique and differentiated valuation model that generates very attractive returns. We are excited about Reservoir’s strong cash flow generating capabilities in a growing industry with significant tailwinds. The portfolio is fully diversified across all genres of music with some of the most iconic hits of the last hundred years. We look forward to Reservoir continuing its future organic growth and acquisitions in this exciting and consolidating industry.
Reservoir’s board of directors and ROCC have unanimously approved the transaction. The transaction will require ROCC shareholder approval and is subject to other customary closing conditions.
Roth Capital Partners, LLC and Craig-Hallum Capital Group LLC are acting as placement agents for the PIPE transaction with major shareholders while Goldman Sachs is acting as financial advisor to Reservoir. Legal representation for the music publishing company has been provided by Paul, Weiss, Rifkind, Wharton & Garrison LLP while Loeb & Loeb LLP is legal counsel to Roth CH II.