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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): March 11, 1998
(February 24, 1998)
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SFX BROADCASTING, INC.
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(Exact name of registrant as specified in charter)
Delaware 0-22486 13-3649750
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(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
650 Madison Avenue, 16th Floor, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 838-3100
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N/A
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
SFX Broadcasting, Inc. (the "Company") is reporting the acquisition by
SFX Entertainment, Inc., a subsidiary of the Company ("SFX Entertainment"), of
certain businesses engaged in the live entertainment business and the execution
of a credit agreement by SFX Entertainment. The stock of SFX Entertainment is
to be distributed to the security holders of the Company in the previously
announced spin-off of SFX Entertainment (the "Spin-Off"). For accounting
purposes, SFX Entertainment has been treated as a discontinued operation by the
Company .
Acquisition of BG Presents
On February 24, 1998, SFX Entertainment, through SFX Entertainment's
wholly-owned subsidiary, BGP Acquisition, LLC, acquired all of the outstanding
capital stock of BG Presents, Inc. ("BGP"), a promoter and producer of, and
owner-operator of venues for, live entertainment in the United States, for a
total consideration of approximately $80.3 million, comprised of $60.8 million
in cash, $12.0 million in repayment of debt, which amount was at least equal to
BGP's working capital, and options to purchase 562,640 shares of Class A Common
Stock of SFX Entertainment valued at approximately $7.5 million (the "BGP
Acquisition"). The options shall become exercisable for no additional
consideration upon consummation of the Spin-Off. If the Spin-Off shall not have
occurred by June 30, 1998, the option holders may elect to sell the options to
SFX Entertainment for $7.5 million plus interest from the closing date.
Acquisition of PACE Entertainment Corporation
On February 25, 1998, SFX Entertainment acquired all of the
outstanding capital stock of PACE Entertainment Corporation ("PACE"), one of
the largest diversified producers and promoters of live entertainment in the
United States (the "PACE Acquisition"). In connection with the PACE
Acquisition, SFX Entertainment acquired 100% of Pavilion Partners, a
partnership that owns interests in 10 venues ("Pavilion"), one-third through
the acquisition of PACE and two-thirds through separate agreements between PACE
and Viacom Inc. and certain of its affiliates ("Blockbuster") and between PACE
and YM Corp. ("Sony") (the acquisition of such two-thirds interest, the
"Pavilion Acquisition"). The total consideration for the PACE Acquisition was
approximately $150.1 million, comprised of $109.5 million in cash, the
repayment of approximately $20.6 million of debt and the issuance of 1.5
million shares of SFX Entertainment's Class A Common Stock valued at
approximately $20 million. Such shares shall be issued upon consummation of the
Spin-Off. The total consideration for the Pavilion Acquisition was
approximately $90.6 million, comprised of $41.4 million in cash, the repayment
of approximately $43.1 million of debt and the assumption of approximately $6.1
million of debt related to a capital lease. In the event that the Spin-Off has
not been consummated on or before July 1, 1998 and each third month thereafter,
each selling stockholder in the PACE Acquisition will have the option to
require SFX Entertainment to pay $13.33 per share in cash in lieu of each share
of SFX Entertainment's Class A Common Stock (the "PACE Option"). The Company
has guaranteed the full and timely performance of all of SFX Entertainment's
obligations under the agreement relating to the PACE Acquisition until the
shares of Class A Common Stock have been delivered or the PACE Option shall
have been exercised by each selling stockholder in the PACE Acquisition.
The PACE Acquisition Agreement provides that each PACE seller will
have an option, exercisable for 90 days after the fifth anniversary of the
consummation of the PACE Acquisition, to require SFX Entertainment to
repurchase up to one-third of the Class A Common Stock of SFX Entertainment
received
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by that seller (representing 500,000 shares in the aggregate) for $33.00 in
cash per share. With certain limited exceptions, these option rights are not
assignable by the sellers.
Acquisition of The Contemporary Group
On February 27, 1998, SFX Entertainment acquired The Contemporary
Group ("Contemporary"), a fully-integrated live entertainment and special event
promoter and producer, venue operator and consumer marketer (the "Contemporary
Acquisition"). The Contemporary Acquisition involved the merger of Contemporary
International Productions Corporation with and into SFX Entertainment, the
acquisition by a wholly-owned subsidiary of SFX Entertainment of substantially
all of the assets, excluding certain cash and receivables, of the remaining
members of Contemporary and the acquisition of the 50% interest in the
Riverport Amphitheatre Joint Venture not owned by Contemporary. The total
consideration of the Contemporary Acquisition was approximately $101.4 million,
comprised of $72.8 million in cash, a payment for working capital of
approximately $9.9 million and shares of SFX Entertainment's Series A
redeemable convertible preferred stock (the "Series A Preferred Stock") valued
at approximately $18.7 million which, upon consummation of the Spin-Off, will
automatically convert into 1,402,850.7 shares of SFX Entertainment's Class A
Common Stock. If the Spin-Off is not consummated by July 1, 1998, then the
shares of Series A Preferred Stock will be redeemed by SFX Entertainment for
the greater of their fair market value (as determined in good faith by the
Board of Directors of SFX Entertainment) or $18.7 million. The Company has
guaranteed the repayment of the redemption price, which guarantee will
terminate upon consummation of the Spin-Off.
In the Contemporary Acquisition Agreement, SFX Entertainment agreed to
make payments to any Contemporary sellers who own shares of Class A Common
Stock of SFX Entertainment on the second anniversary of the consummation of the
Contemporary Acquisition. These payments will be due only if the average
trading price of the Class A Common Stock during the 20-day period ending on
the anniversary date is less than $13.33.
Acquisition of The Network Magazine Group and SJS Entertainment
On February 27, 1998, SFX Entertainment and its wholly-owned
subsidiary, SFX Network Group, LLC, (i) acquired all of the outstanding capital
stock of The Album Network, Inc. and SJS Entertainment Corporation ("SJS"),
(ii) acquired substantially all of the assets and properties, and assumed
certain labilities and obligations, of The Network 40, Inc. and (iii) acquired
an office building and related property (the "Real Property") used in the
business of The Album Network, Inc. and The Network 40, Inc. (the "Network
Acquisition"). The Album Network, Inc. and The Network 40, Inc. are publishers
of trade magazines for the radio broadcasting industry and SJS is an
independent creator, producer and distributor of music-related programming,
services and research. The total purchase price in the Network Acquisition was
approximately $66.8 million, comprised of $52.0 million in cash, a payment of
approximately $1.8 million for working capital in excess of $500,000,
reimbursed sellers' costs of approximately $500,000, the purchase of the Real
Property for approximately $2.5 million and the issuance of approximately
750,188 shares of SFX Entertainment's Class A Common Stock valued at
approximately $10 million. Such shares shall be issued upon the consummation of
the Spin-Off. If the Spin-Off does not occur prior to June 30, 1998, at the
option of the persons and entities receiving shares of Class A Common Stock in
the Network Acquisition, SFX Entertainment may be required to pay $10 million
(plus interest at a rate of 10% per annum from the date of closing) in lieu of
issuing shares of SFX Entertainment's Class A Common Stock. The $2.5 million
purchase
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price for the Real Property was comprised of cash of $700,000 and the
assumption of debt of $1.8 million.
Pursuant to the agreement relating to the Network Acquisition, SFX
Entertainment has agreed to increase the purchase price in the Network
Acquisition (not including the purchase price for the Real Property) based on
actual 1998 EBITDA (as defined in the agreement relating to the Network
Acquisition) of the companies and assets other than the Real Property acquired
in the Network Acquisition as follows: (a) by $4.0 million if the 1998 EBITDA
equals $9.0 million, (b) by an additional $4 for each $1 of additional 1998
EBITDA between $9.0 million and $10.0 million, and (c) by an additional $6 for
each $1 of additional 1998 EBITDA between $10.0 million and $11.0 million. This
contingent consideration of up to $14.0 million is payable in stock or, in
certain circumstances, in cash no later than March 20, 1999.
Acquisition of Concert/Southern Promotions
On March 4, 1998, SFX Entertainment, through its indirect wholly-owned
subsidiary, Atlanta Concerts, Inc., acquired Concert/Southern Promotions, a
promoter of live music entertainment in the Atlanta metropolitan area, for a
total consideration of $16.9 million, including $300,000 for a working capital
adjustment (the "Concert/Southern Acquisition"; the BGP Acquisition, the PACE
Acquisition, the Pavilion Acquisition, the Contemporary Acquisition, the
Network Acquisition and the Concert/Southern Acquisition are collectively
referred to as the "Acquisitions").
The purchase price in each of the Acquisitions was determined by
arms-length negotiations between SFX Entertainment and the other parties
thereto. The purchase price of the Acquisitions was financed from the proceeds
of an offering exempt from the registration requirements of the Securities Act
of 1933, as amended, of $350 million in aggregate principal amount of SFX
Entertainment's 91/8% Senior Subordinated Notes due 2008, which was consummated
on February 11, 1998 (the "Offering") and borrowings under the Credit Agreement
(as such term is defined below).
The foregoing descriptions do not purport to be complete descriptions
of the terms of the acquisition agreements relating to the Acquisitions and are
qualified by reference to such acquisition agreements, copies of which are
attached hereto as exhibits and incorporated herein by reference. Pursuant to
such acquisition agreements, SFX Entertainment (i) under certain circumstances
may be required to repurchase shares of its Class A Common Stock or make
additional payments in connection therewith and, in the event that the Spin-
Off does not occur, SFX Entertainment would have to pay approximately $56.2
million in lieu of SFX Entertainment's Class A Common Stock, (ii) has granted
certain rights of first refusal, certain of which are exercisable at 95% of the
proposed purchase price, and (iii) in connection with the PACE Acquisition, has
granted Brian Becker, who has been appointed to SFX Entertainment's Board of
Directors, the option to acquire, after the second anniversary of the
consummation of the PACE Acquisition, SFX Entertainment's then existing motor
sports line of business (or, if that business has previously been sold, SFX
Entertainment's then existing theatrical line of business) at its then fair
market value.
The approximately 4.2 million shares of SFX Entertainment's Class A
Common Stock expected to be issued in connection with the Acquisitions have
been valued by the applicable parties at $13.33 per share for purposes of
calculating the consideration to be paid in the Acquisitions. Such valuation is
based upon certain financial projections developed jointly by SFX Entertainment
and the relevant sellers and there can be no assurance that the assumptions
upon which the valuation is based will, in fact, be correct or that the
valuation will approximate the actual trading price. To the knowledge of
management of SFX Entertainment,
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at the time that the acquisition agreements relating to the Acquisitions were
executed there was no trading market in the shares of Class A Common Stock of
SFX Entertainment. Recently, certain broker/dealers have begun trading
derivative securities representing the right to acquire shares of the Class A
Common Stock on a when-issued basis. The prices at which the derivative
securities have been trading are not necessarily representative of how the
market will value the shares of Class A Common Stock of SFX Entertainment
subsequent to the Spin-Off. On March 9, 1998, the last sale price on the OTC
Bulletin Board of the right to acquire a share of Class A Common Stock of SFX
Entertainment was $19.75.
Execution of Credit Agreement
On February 26, 1998, SFX Entertainment, its subsidiaries and the
lenders that are parties thereto executed a Credit and Guarantee Agreement (the
"Credit Agreement") which established a $300.0 million senior secured credit
facility comprised of (i) a $150.0 million eight-year term loan (the "Term
Loan") and (ii) a $150.0 million seven-year reducing revolving credit facility.
Borrowings under the Credit Agreement are secured by substantially all of the
assets of SFX Entertainment, including a pledge of the outstanding stock of
substantially all of its subsidiaries and guaranteed by substantial all of SFX
Entertainment's subsidiaries. On February 27, 1998 SFX Entertainment borrowed
the Term Loan.
The foregoing description of the terms of the Credit Agreement does
not purport to be complete and is qualified by reference to the Credit
Agreement, a copy of which is attached hereto as an exhibit and incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
2.1 Stock Purchase Agreement, dated as of December 11, 1997,
among each of the shareholders of BG Presents, Inc. and
BGP Acquisition, LLC (incorporated by reference to Exhibit
10.19 to the Registration Statement on Form S-1
(Registration No. 333-43287) of SFX Entertainment, Inc.
filed with the Securities and Exchange Commission on
December 24, 1997).
2.2 Stock Purchase Agreement, dated as of December 12, 1997,
by and among PACE Entertainment Corporation, the holders
of the Common Stock of PACE Entertainment Corporation
listed on Exhibit 1 to the Stock Purchase Agreement and
SFX Entertainment, Inc. (incorporated by reference to
Exhibit 10.23 to the Registration Statement on Form S-1
(Registration No. 333-43287) of SFX Entertainment, Inc.
filed with the Securities and Exchange Commission on
December 24, 1997).
2.3 Agreement and Plan of Merger and Asset Purchase Agreement,
dated as of December 10, 1997, by and among SFX
Entertainment, Inc., Contemporary Investments Corporation,
Contemporary Investments of Kansas, Inc., Continental
Entertainment Associates, Inc., Capital Tickets, LP,
Dialtix, Inc., Contemporary International Productions
Corporation, Steven F. Schankman Living Trust, dated
10/22/82, Irving P. Zuckerman Living Trust, dated 11/24/81,
Steven F. Schankman and Irving P. Zuckerman (incorporated
by reference
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to Exhibit 10.17 to the Registration Statement on Form S-1
(Registration No. 333-43287) of SFX Entertainment, Inc.
filed with the Securities and Exchange Commission on
December 24, 1997).
2.4 Stock and Asset Purchase Agreement, dated as of
December 2, 1997, by and among SFX Network Group, L.L.C.,
SFX Entertainment, Inc., and Elias N. Bird, individually
and as Trustee under the Bird Family Trust u/d/o 11/18/92,
Gary F. Bird, individually and as Trustee under the Gary F.
Bird Corporation Trust u/d/o 2/4/94, Stephen R. Smith,
individually and as Trustee under the Smith Family Trust
u/d/o 7/17/89, June E. Brody, Steven A. Saslow and The
Network 40, Inc. (incorporated by reference to Exhibit
10.21 to the Registration Statement on Form S-1
(Registration No. 333-43287) of SFX Entertainment, Inc.
filed with the Securities and Exchange Commission on
December 24, 1997).
2.5 Purchase and Sale Agreement, dated as of December 15,
1997, by and among Alex Cooley, S. Stephen Selig, III,
Peter Conlon, Southern Promotions, Inc., High Cotton,
Inc., Cooley and Conlon Management, Inc., Buckhead
Promotions, Inc., Northern Exposure, Inc., Pure Cotton,
Inc., Interfest, Inc., Concert/Southern Chastain Promotions
Joint Venture, Roxy Ventures Joint Venture and SFX
Concerts, Inc. (incorporated by reference to Exhibit 10.22
to the Registration Statement on Form S-1 (Registration No.
333-43287) of SFX Entertainment, Inc. filed with the
Securities and Exchange Commission on December 24, 1997)
2.6 Purchase Agreement, dated as of December 19, 1997, by and
among SM/PACE, Inc., PACE Entertainment Corporation,
Charlotte Amphitheater Corporation, The Westside
Amphitheater Corporation and Viacom Inc. (incorporated by
reference to Exhibit 10.28 to the Registration Statement on
Form S-1 (Reg. No. 333-43287) of SFX Entertainment, Inc.
filed with the Securities and Exchange Commission on
January 22, 1998).
2.7 Letter Purchase Agreement, dated as of December 22, 1997,
by and among SM/PACE, Inc., YM Corp. and PACE
Entertainment Corporation (incorporated by reference to
Exhibit 10.29 to the Registration Statement on Form S-1
(Reg. No. 333-43287) of SFX Entertainment, Inc. filed with
the Securities and Exchange Commission on January 22,
1998).
3.1 Certificate of Amendment to the Certificate of
Incorporation of SFX Entertainment, Inc., as filed with
the Secretary of State of the State of Delaware on
February 25, 1998 (incorporated by reference to Exhibit
3.1 to the Form 8-K of SFX Entertainment, Inc. filed with
the Securities and Exchange Commission on March 10, 1998).
3.2 Certificate of Designation relating to the Series A
Preferred Stock of SFX Entertainment, Inc., as filed with
the Secretary of State of the State of Delaware on
February 27, 1998 (incorporated by reference to Exhibit 3.2
to the Form 8-K of SFX Entertainment, Inc. filed with the
Securities and Exchange Commission on March 10, 1998).
4.1 Indenture, dated February 11, 1998, by and among SFX
Entertainment, Inc., certain of its
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subsidiaries and The Chase Manhattan Bank (incorporated by
reference to Exhibit 10.2 to the Form 8-K of SFX
Broadcasting, Inc. (Commission File No. 0-22486) filed with
the Securities and Exchange Commission on February 18,
1998).
10.1 Registration Rights Agreement, dated as of February 11,
1998, relating to the 91/8% Senior Subordinated Notes due
2998 of SFX Entertainment, Inc., by and among SFX
Entertainment, Inc., the subsidiaries of SFX Entertainment
named therein, Lehman Brothers Inc., Goldman, Sachs & Co.,
BNY Capital Markets, Inc. and ING Barings (incorporated by
reference to Exhibit 10.3 to the Form 8-K of SFX
Broadcasting, Inc. (Commission File No. 0-22486) filed
with the Securities and Exchange Commission on February
18, 1998).
10.2 Credit and Guarantee Agreement, dated as of February 26,
1998, by and among SFX Entertainment, the Subsidiary
Guarantors party thereto, the Lenders party thereto,
Goldman Sachs Credit Partners, L.P., as co-documentation
agent, Lehman Commercial Paper Inc., as co-documentation
agent, and The Bank of New York, as administrative agent
(incorporated by reference to Exhibit 10.2 to the Form 8-K
of SFX Entertainment, Inc. filed with the Securities and
Exchange Commission on March 10, 1998).
10.3 Purchase Agreement, dated February 5, 1998, relating to
the 91/8% Senior Subordinated Notes due 2008 of SFX
Entertainment, Inc., by and among SFX Entertainment, Inc.,
Lehman Brothers Inc., Goldman, Sachs & Co., BNY Capital
Markets, Inc. and ING Barings (incorporated by reference
to Exhibit 10.4 to the Form 8-K of SFX Entertainment, Inc.
filed with the Securities and Exchange Commission on March
10, 1998).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
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Name: Howard J. Tytel
Title: Executive President
Date: March 11, 1998
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