How much is a music distribution company worth these days? The Orchard, one of the largest independent music distributors, is going private in a deal valuing the company at about $13 million.
Its largest shareholder, private equity firm Dimensional Associates, is buying the 58 percent of shares it does not already own.
Dimensional is paying $2.05 a share, which is more than a 20 percent premium over yesterday’s closing price. With 6.228 million shares outstanding, that values the business at $12.8 million—not a hell of a lot, considering that it is less than one quarter’s revenues.
The Orchard has yet to file an annual report for last year, but for the first nine months of 2009, it has lost $17.5 million on revenues of $45.5 million.
The Orchard specializes in digital distribution. The fact that it cannot make any money is yet another nail in the coffin of the music industry. Perhaps under private ownership, it can transition to a different business model. Dimensional Associates also owns eMusic. Maybe there is a way to combine the two.