Mountain & Co. I (NASDAQ:MCAA) has entered into a definitive agreement to combine with sports media platform Barça Media at a pro forma enterprise value of $973 million.

Barcelona-based Barça Media is the media wing of the FC Barcelona soccer club, which aims to have a presence in subscription programming, esports and other digital content.

The combined company is expected to trade on the Nasdaq under the symbol “BRME” once the deal is completed in the fourth quarter of 2023.

Transaction Overview

Mountain & Co. I has about $128 million in its current trust after seeing 46.8% of shares redeemed in a February extension vote.

Barça Media is expected to roll $900 million worth of shares into the combined company and should further redemptions range from 20% to 70%, it would add $82 million to $8 million to its balance sheet after $30 million in transaction expenses.

Assuming no further redemptions, Barça Media shareholders would own 83% of the combined company at close. Public SPAC shareholders would own a 12% stake in this case and the sponsor’s promote shares would convert to a 5% stake.

The parties have not yet released their merger documents, but Mountain & Co. I’s profile page will be updated once additional terms and details are made available.

Quick Takes: SPAC watchers have been searching the sky for a variety of signs that some of the dark clouds are starting to move on from SPACs, and one major bellwether has been retail activity.

At the SPAC market’s recent height, retail traders were pushing up nearly every SPAC deal on announcement and even more so when the target company had a built-in fanbase making the buys. With that in mind, it’s little surprise that many SPACs have sought to get into sports to capture that lightning in a bottle.

But, hopes of a splashy deal like a SPAC merger with a professional sports team seemed to dissipate along with RedBall Acquisition Corp.’s passing. It had the right elements in place – backing from a successful sports-focused private equity fund and Mr. Moneyball himself, Billy Bean co-chairing the Board.

Despite juicy rumors RedBall might take the owner of the Boston Red Sox and Liverpool Football Club public, that deal never materialized and the SPAC liquidated after its proposed combination with ticket marketplace Seat Geek fell through.

Early this summer, with the debt ceiling fight resolved, there were signs that retail activity was coming back. But it takes two to tango with SPAC deals.

The same kind of companies that might excite retail may also have been wary of the SPAC product in general and in particular about doing a deal at a time that the market was still being unkind to nearly all new issuance.

Now that the market has put a few successful 2023 IPOs in the rearview mirror, it looks like it might be returning just in time to fit into the plans of one of those buzzy companies.

With an estimated 330 million fans worldwide, FC Barcelona is one of the world’s most popular teams across all sports. Globally, an estimated 434 million people tuned into their games in 2021 and 2022 and the team has generated €1.9 billion in ($2.08 billion) in revenue over the past three years – second only to their compatriots and rivals, Real Madrid.

It’s not the whole team that would be going public with this deal, however, only its nascent media arm. But, the newly formed Barça Media is nonetheless a major strategic initiative of the football club aimed at capturing a greater share of the cross-platform media revenue generated by the squad.

Currently, about 36% of the club’s revenue comes from TV rights and it hopes that Barça Media will eventually generate a quarter of the club’s revenue through video content, esports and a variety of digital licensing opportunities.

Its video studios plan to roll out about 10 shows for the 2023 season including behind-the-scenes documentaries, an animated series and team history programming.

On the esports side, it already has branded teams competing in a variety of game tournaments and plans to pursue additional licensing and sponsorship opportunities. It also sells digital content in the form of NFTs and metaverse objects.

Even if NFTs as a whole are on a downswing, major brands have still been able to monetize them. Barça Media sold two NFTs for a collective $1 million over the past year and the industry overall continues to turn average EBITDA margins of 12%, according to an S&P Capital IQ report it cites in its presentation.

Its video revenue would come via streaming subscriptions and licensing fees while its esports business would come from contracts and events. The company expects it could meet the current industry averages for EBITDA margins in the low 20s for each of these divisions.

And, with 420 million social media followers across all channels, the company estimates that it could generate $94.5 million in EBITDA if it gets just 1.5% of this audience to provide $15 in EBITDA by purchasing some mix of its services.

Barça Media has not yet shared what it expects to generate itself nor what these divisions have raked in historically. Many were only grouped together in their current form in the past few months.

There are also no easy public comparisons to what Barça Media is aiming to be. The closest in general would likely be the YES Media network, which was a similar grouping of TV rights and media content around the New York Yankees. The team bought it back from outside investors for about $3.5 billion in 2019.

The UK’s Manchester United Football Club (NYSE:MANI) is publicly listed, but has not operated as much of its media on a proprietary platform like Barça Media. But, it and other sports content peers like Madison Square Garden (NYSE:MSGS) trade on average at about 20x their 2024E EBITDA.

Diversified content creators like Electronic Arts (NASDAQ:EA) and Warner Music Group (NASDAQ:WMG) trade on average at 15x and the major content streamers like Netflix (NASDAQ:NFLX) at 12x.

Moving backwards from this deal’s $973 million valuation, Barça Media would be in line with the first group if they expect $48.6 million in EBITDA in 2024, $64.8 million for the second and $81 million for the last.

Click here for the full investor presentation.

ADVISORS

• Barca Media Advisors:
  • Key Capital acted as exclusive financial advisor
  • Perez-Llorca acted as lead legal advisor
  • Troutman Pepper Hamilton Sanders LLP acted as a US legal advisor
• Mountain & Co. Advisors:
  • Sullivan & Cromwell LLP acted as lead legal advisor
  • Stifel acted as capital markets advisor, and Kirkland & Ellis LLP acted as legal advisor to Stifel