Live Nation Entertainment Inc. (LYV:US), owner of the world’s largest ticket seller, won an arbitration ruling that removes any liability to CTS Eventim AG (EVD), a rival to its Ticketmaster unit. The shares surged the most in four years.
“The arbitrator’s final decision vindicates Live Nation’s steadfast position that we justifiably terminated our contract with CTS,” Michael Rapino, president and chief executive officer of Live Nation Entertainment, said today in a statement.
The decision removes a potential $210 million charge for Live Nation, the estimate of Stifel Nicolaus & Co. The company terminated a 10-year contract with CTS in 2010 that covered ticketing systems in the U.S., Canada and some European countries. Live Nation, also the world’s biggest concert promoter, said CTS failed to deliver a “world-class ticketing system,” according to a company regulatory filing.
“It removes a significant obstacle,” John Healy, an analyst with Northcoast Research, said in a phone interview. “This liability had weighed on investors’ psychology.”
Live Nation, based in Beverly Hills, California, rose 17 percent to $16.17 at the close in New York, the most since March 2009. Including today’s gain, the stock has climbed 74 percent this year.
CTS, based in Bremen, Germany, had brought the proceeding before the International Court of Arbitration of the International Chamber of Commerce in April 2010.
“The management board of CTS Eventim AG is disappointed but will accept the ruling without further comments,” the company said in a statement. “It is important, after 3 years duration of proceedings, that Eventim is able to fully concentrate on its operational business again.”
Shares of CTS fell 0.3 percent to 31.75 euros today in Germany, before the decision was made public. The stock has climbed 19 percent this year.
An adverse decision would result in a charge for Live Nation ranging from $100 million to $210 million, Stifel analyst Benjamin Mogil estimated in January.
“This victory makes Live Nation attractive to more investors,” said Healy, who has a neutral rating on the shares. “Investors would bring this up as a major issue when deciding about Live Nation because it was such an unknown outcome.”
Standard & Poor’s said last month that it might consider raising Live Nation’s credit rating to BB- from B+ if, among other things, the CTS arbitration was resolved favorably.
The company didn’t set aside reserves for a possible verdict, leaving the company vulnerable if the arbitrator had decided for CTS, Healy said.
“A loss would have been detrimental, they would have had to write a check,” Healy said. “But the management felt very comfortable with the case they brought to the arbitrator, and apparently for good reason.”
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