T4F Entretenimento SA’s lead as the biggest concert promoter in South America is being eroded after billionaire Eike Batista’s entertainment venture stole one of its headline shows.
T4F plunged 17 percent yesterday, the most since it first sold shares in April 2011, after IMX, a partnership between Batista’s EBX Group Co. and IMG Worldwide Inc., said it’s working with Cirque du Soleil to promote live events in South America. The deal is a blow to T4F, promoter of the Canadian acrobatic show in South America since 2006 and the company’s biggest draw among regularly scheduled offerings.
Batista is aiming to take market share as rising incomes boost demand for concerts and live shows in Brazil. T4F, which has cornered the market for shows in South America from pop star Lady Gaga to soul singer Joss Stone and has a deal to present Walt Disney Co. musicals, charges up to twice as much for concert tickets as its peers in the U.S. and Europe.
“We are talking about a country that is becoming more and more a major player in the global economy,” said Daniel Lamarre, chief executive officer of Cirque du Soleil, adding that he wouldn’t be “surprised” if the deal can generate $100 million of revenue in the country within two years. “If I want to be a true global brand, I have to be a Brazilian brand.”
T4F’s contract for Cirque du Soleil’s Corteo show, which tells the story of a clown picturing his own funeral taking place in a carnival atmosphere, runs through January 2015. IMX will take over promoting other Cirque du Soleil shows going forward.
IMX’s move shows it’s willing to bid high to become a top player in the entertainment business, BTG Pactual wrote in a note to clients today. BTG cut the 12-month target price for T4F to 20 reais from 23 reais, saying the company lost “one of its most relevant sources of recurring income.”
“The news is pretty negative” for T4F, Daniela Bretthauer, an analyst at Raymond James who rates the stock the equivalent of a buy, said by telephone from Sao Paulo yesterday. Still, T4F “has successfully diversified its content into other high margin events since its inception,” she said later in a report.
Batista’s name recognition and sway in business circles were reasons for the decision to switch promoters, Lamarre said in an interview at Mr. Lam, Batista’s Chinese restaurant in Rio de Janeiro. The site features a table built around a Lamborghini engine that Batista used to win a Brazilian speed-boat race in 1990.
T4F has been a favorite among analysts covering the entertainment industry in Brazil, with 2012 sales expected to grow at a record rate. The company’s sales growth this year is poised to outpace Live Nation Entertainment Inc. (LYV:US), the world’s biggest concert promoter by revenue, according to analysts’ forecasts.
Net revenue will rise 25 percent to 759.8 million reais ($374.2 million) this year, the median of five analyst estimates compiled by Bloomberg. That compares with an estimated 1 percent increase to $5.46 billion for Beverly Hills, California-based Live Nation and a 7 percent gain to 540 million euros ($697 million) for Bremen, Germany-based CTS Eventim AG. (EVD)
T4F, which stands for Time For Fun, added 0.9 percent to 14.10 reais at the close of trading in Sao Paulo today, extending this year’s gain to 23 percent. The Bovespa Small Cap index is up 22 percent in the period. Live Nation climbed 3.5 percent for the year before today in New York while CTS has jumped 0.8 percent in Frankfurt.
The Brazilian company has the exclusive rights to promote Live Nation artists in South America, including Madonna’s MDNA show in Sao Paulo in December, allowing it to score sponsorship deals.
“That’s what’s interesting about their business model, they gain by selling the tickets and sponsorships at the events,” Bruno Piacentini, a partner at Fama Investimentos (SHOW3) who helps manage 1.3 billion reais in assets, including T4F shares, said in a Sept. 24 telephone interview from Sao Paulo. The IMX deal doesn’t hurt the company’s outlook, he said in a follow-up e-mail. “Competition for shows is part of the business.”
Tickets to see Lady Gaga in Sao Paulo in November cost as much as 750 reais, or about $370, according to T4F’s online ticket sales service. That compares with a high end of almost $160 in Paris and $175 in Los Angeles.
Cirque du Soleil was T4F’s headline show in its theater and exhibitions category, which accounted for more than 15 percent of revenue last year.
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