French music-streaming service Deezer is going public through a SPAC merger seven years after failing to list under its own steam.
Deezer is merging with I2PO, a €275m Paris-listed cash shell headed by Iris Knobloch, former president of WarnerMedia in France, Benelux, Germany, Austria and Switzerland.
The merger applies a pre-money equity valuation of €1.05bn to Deezer.
A PIPE is expected to raise €150m, taking total cash available before redemptions to €425m. The SPAC has €135m committed so far, comprising €120m in the PIPE and a pledge from Groupe Artemis, the family holding company of Kering CEO Francois-Henri Pinault, not to redeem its €15m IPO investment.
The PIPE has so far been subscribed for by most existing shareholders of Deezer including Access Industries, UMG, Warner Music, Orange, Kingdom Holdings, Eurazeo and Iliad founder Xavier Niel, as well as new long-term French and international money, including Bpifrance and Media Participations.
Deutsche Bank, JP Morgan, HSBC and Societe Generale are running the PIPE.
The company claims to be the second-largest independent music-streaming platform globally, a boast of questionable significance as that excludes Apple Music, Amazon Music, YouTube Music, Tencent Music and NetEase Music. Deezer is not profitable but saw double-digit revenue growth in February from a year earlier and is launching a partnership with RTL+ in Germany.
Deezer has 9.6 million subscribers and earned revenue of €400m in 2021. It has ambitions of reaching €1bn by 2025, breaking even at an Ebitda level, and having cashflow exceeding €50m. Revenue growth was around 6% in 2021.
In Q4 2021, Spotify had 180 million premium subscribers worldwide, with more than 400 million active users. Apple said in 2019 that it had 60 million paid music subscribers, with Amazon reporting in 2020 that it had more than 55 million music customers, most of which were said to be paying customers.
Spotify reported revenue of €2.68bn in Q4 2021, up 24% year-on-year, with free cashflow of €103m.
Apple Music is reported to have had US$4.1bn revenue in 2020.
I2PO listed in July raising €275m, having launched with a €250m target. It is the second SPAC backed by Matthieu Pigasse, former CEO of Lazard, who was also involved in the €300m 2020 SPAC IPO of 2MX Organic.
2MX Organic entered exclusive negotiations at the end of March with French agribusiness group InVivo to merge with its distribution arm, InVivo Retail, which will have an enterprise value of €675m.
Deezer had hoped to go public in 2015 but the €300m IPO failed to survive in a volatile market that saw deals cancelled, restructured and others trade down in the aftermarket. Specific challenges for Deezer were the 35% drop in key peer Pandora Media in the final days of bookbuilding and Apple Music overtaking Deezer's subscriber numbers three months after launch, a fact revealed during roadshows.
The post-money equity valuation was €884m–€1.09bn for a 31.7%–39% free-float.
Deezer reported a loss of €27m in 2015 on revenues of €141.92m, and had approximately 6 million paid subscribers.
The redemption period for I2PO shareholders runs from April 20 to May 19, with the merger agreement due to complete in the week beginning May 23 and AMF approval of the merger prospectus expected by the end of May. I2PO and Deezer shareholders are due to have meetings in the week beginning June 27, and the PIPE is due to wrap up by the week beginning July 4.
I2PO shares were at unchanged at €9.90 on Tuesday.