AEG, as a corporation, owns and operates Staples Center in Los Angeles. (Getty Images)
Food, ticketing and events components could be key as companies with differing strategies combine as ASM Global
The blockbuster merger of AEG Facilities and SMG Worldwide should not greatly affect the venue operations side, industry officials said. But they say it’s worth keeping an eye on the evolution of the companies’ ticketing, events and food service businesses, because all three ancillaries provide critical revenue sources.
The companies, which are the two biggest players in the private management of sports and entertainment venues, announced in early February that they have formed a definitive merger, creating a new entity that will be called ASM Global. Financial terms were not disclosed.
AEG Facilities and Onex, a private equity firm that acquired SMG for $1 billion in 2017, will each own 50 percent of the new company. The merger will be completed later this year, subject to regulatory approvals.
Between the two companies, the deal covers more than 300 facilities worldwide, including multiple NBA and NHL arenas and six NFL stadiums. Bob Newman, president of AEG Facilities, will be named president and CEO of ASM Global. Wes Westley, SMG’s CEO, will join the new firm’s board of directors. Westley will retire pending completion of the merger, SMG officials confirmed. He has run SMG for 25 years.
Sources said the deal was most likely driven by Onex, the private equity firm that some industry observers say vastly overpaid for SMG. Unlike AEG, SMG does not have equity in the more than 200 facilities it operates in North America and overseas.
It’s a game changer for AEG Presents, which stands to gain more leverage in booking content with the addition of SMG’s portfolio, said Raj Saha, general manager of Fiserv Forum in Milwaukee and a former AEG executive.
For SMG, the merger has greater implications on the investment side, considering it’s owned by a private equity firm, said Michael Marion, general manager of Verizon Arena in North Little Rock, Ark.
“You have a venture capital firm that owns SMG and paid a lot for it a few years ago,” said Ed Rubinstein, president of Arena Network and a veteran arena manager. “AEG, even though it’s not owned by a venture capital firm, the guy that owns it (Phil Anschutz) is as big as one, financially. Together, they probably agreed there would be increased value if they merged.”
Newman and Westley declined comment.
AEG Facilities is a subsidiary of AEG Worldwide. The agreement covers venue management, plus content and services provided by two other divisions: AEG Presents, the world’s second-biggest concert promoter, and AEG Global Partnerships. Those two subsidiaries will operate across all ASM Global properties, sources said.
In addition, SMG, through its senior vice president of entertainment, Jim McCue, brings its own content division to the table.
“It definitely opens the door for AEG’s booking opportunities to have that many more venues to shop and work from,” said Daren Libonati, vice president of entertainment and outdoor festivals for MGM Grand Resorts and former general manager of Thomas and Mack Center, Sam Boyd Stadium and Cox Pavilion in Las Vegas.
AEG has its own ticketing business, AXS, which has its system in place at most of its 70 venues. Ticketing deals are signed with the buildings, and as those run their course, there could potentially be additional business for AXS to pursue after the merger is completed.
“Does that mean AEG would like SMG to become an all-access entity so that its network grows bigger?” Libonati said. “If you look at it, Ticketmaster is a monster and their partner is Live Nation, but who’s really the breadwinner? It’s the Ticketmaster side. The other guy just feeds the turnstiles.”
Live Nation remains partial to Ticketmaster venues, but the world’s biggest promoter also books many events at non-Ticketmaster buildings, Rubinstein said.
“From AEG’s point of view, they would probably like to increase the number of venues that have AXS,” Rubinstein said. “It really comes down to which is the best ticketing system for each individual venue, and I don’t know that it will change very much with this merger.”
For Rubinstein, the most intriguing part of the merger is the vast difference in culture between the two companies. AEG, as a corporation, owns and operates Staples Center Its real estate group owns entertainment districts and venues in Los Angeles, London, Hamburg and Berlin.
SMG is completely the opposite. It doesn’t own real estate and collects management fees to generate revenue.
SMG does own Savor, a food service company with 50-plus accounts, most tied to SMG-managed buildings. AEG does not own a food vendor, although it does have a strong relationship with Levy. Compass Group, Levy’s parent company, owns 49 percent of AEG Facilities. For 15 years, Levy has been AEG’s food provider of choice for the arenas it owns and operates under a deal the two companies signed in 2004 along with Wolfgang Puck.
“How do you merge the two corporate cultures and what do you do about the F&B component that’s coming into the joint company?” Rubinstein said. “Bob Newman is a good administrator, a good CEO and a very good marketer. He knows the numbers. He’ll make it work.”
Steve Peters, president and owner of VenuWorks, a smaller facility management firm, says the merger won’t affect his firm’s business. VenuWorks runs about 40 buildings, most in secondary markets. SMG and AEG, by comparison, run facilities primarily in larger markets with big league tenants.
“Every time we see consolidation — Live Nation and Ticketmaster, for example — everybody runs around saying, ‘Wow.’ But then life goes on and there’s not a lot of changes,” Peters said.
“There will be changes (internally). There are wonderful people working in both those companies. They’re formidable competitors. Unfortunately, I work in a little bit different realm than they do. I’m not duking it out to get the Greek Theatre in California.”
Antitrust could be at stake, considering the top two firms in the space are merging, and it’s up to the Department of Justice to make that determination. In addition to VenuWorks, competitors include Spectra and Oak View Group, parent company of VenuesNow.
“Our lawyers are studying this deal and we’ll let them figure out whether this is anti-competitive,” said Tim Leiweke, Oak View Group’s co-founder and CEO and former head of AEG. “That said, we have a different model and I’ll let OVG’s progress in the next few months speak for itself. The big question here will be if this is an antitrust issue.”
Peters and Rubinstein both pointed to the Ticketmaster-Live Nation merger approved in 2010 as a sign that the federal government will most likely approve the AEG Facilities-SMG deal, “particularly with the current political climate in D.C.,” Peters said.
“If you consider all the venues they would control, it’s still just a fraction of all the facilities in the U.S.,” he said. “There’s all the venues managed by cities and counties and boards. … It would not be anywhere near a monopoly.”
Another question is whether ASM Global will continue AEG Facilities’ business model of investing money in facility development.
“OVG entered into managing facilities as well as putting their own equity in the venues and diversifying by offering services similar to what Tim did with AEG,” said Brad Mayne, president and CEO of the International Association of Venue Managers. “Obviously, it caught the attention of the industry. There’s a lot of benefits to having control over the project from start to finish.”
Bottom line, the merger came as a surprise to many in the industry, including spokespersons for both AEG and SMG.
“I had no inkling that anything like that was happening,” said Rubinstein, whose Arena Network booking consultancy turns 20 years old this year. “I talked to one AEG person who said they couldn’t believe it was kept under wraps as long as it was.”