Feb. 10 (Bloomberg) -- Live Nation Inc. and Ticketmaster Entertainment Inc., the largest companies in live music, agreed to merge and began a defense against antitrust concerns raised by lawmakers, consumer groups and Bruce Springsteen.

Shareholders in each company will own about half the equity in the new one, which will have an enterprise value of about $2.5 billion, according to a statement today. The new Live Nation Entertainment will have almost $6 billion in annual sales.

Concerns over the power of the combined company arose before the deal was announced. Ticketmaster owns the world’s largest ticket-selling network and the biggest artist-management firm. Live Nation is the largest concert promoter, owns the most venues and has exclusive deals with Madonna, U2 and Jay-Z.

“It’s going to get a thorough review,” said Marc Schildkraut, an attorney with Howrey LLP in Washington who was previously assistant director of the Federal Trade Commission’s competition bureau. “You have a firm that has a very large share of the ticket-selling market and they are acquiring a challenger.”

Ticketmaster Chairman Barry Diller, who will hold that title at the new company, defended the merger, saying it won’t lead to higher ticket prices. Diller said he’s been working to combine the companies “for many years.”

“Ticketmaster does not set prices, Live Nation does not set prices. Artists set the prices,” Diller said on a conference call. “Everyone else is just a distributor or a service provider.”

‘Knives Out’

Investors in West Hollywood, California-based Ticketmaster will receive 1.384 shares of Live Nation for each of their shares. Based on yesterday’s closing prices, that represents a premium of 11 percent for Ticketmaster holders.

The new company is pitching itself as an all-in-one link between artists and the venues where fans see them. The company will generate additional sponsorship revenue from ticket sales, events and merchandise, said Michael Rapino, who will be chief executive officer of the new company.

“This merger is going to allow us to attract back into the music industry tons of money that will open up all sorts of other opportunities for our artists and venues,” Rapino, currently Live Nation’s CEO, said in an interview.

The deal comes as record labels try to strike deals with artists to gain a percentage of all revenue, including touring and merchandise. Music companies may see the merger as a threat as they try to make up for dropping album sales, said David Card, a New York-based analyst with Forrester Research

“There are going to be people circling each other with knives out to figure out how this is going to work,” Card said.

Azoff’s Role

Ticketmaster fell 42 cents, or 6.4 percent, to $6.15 at 4 p.m. New York time in Nasdaq Stock Market trading. It has declined 74 percent since it started trading in August. Live Nation, down 50 percent in the past year, lost 47 cents, or 8.9 percent, to $4.82 on the New York Stock Exchange.

Ticketmaster’s CEO, Irving Azoff, will become executive chairman and CEO of the Front Line artist-management unit. The board will be split evenly among representatives from both companies, they said.

The companies will save $40 million by combining functions and will provide “measurable benefits” to consumers, Rapino said in the statement. The new company will work to simplify the ticketing process and increase attendance at events, he said.

Regulatory Issues

The agreement ends a brief period of competition between the companies. Live Nation was Ticketmaster’s largest customer until Rapino started a rival service. The contract represented about 17 percent Ticketmaster’s 2007 sales.

U.S. lawmakers with authority over antitrust legislation called for a review. U.S. Senator Herb Kohl, the Wisconsin Democrat who chairs the Senate Judiciary antitrust subcommittee, issued a joint statement with Utah Republican Orrin Hatch saying they will be examining the merger.

U.S. Senator Charles Schumer, a New York Democrat who is also on the Judiciary Committee, and U.S. Representative Bill Pascrell Jr., a New Jersey Democrat, have called for a federal inquiry. Connecticut Attorney General Richard Blumenthal said he has been in touch with other states regarding an investigation.

Springsteen criticized the merger plan as a “near monopoly situation” after some people were unable to buy tickets to his American tour through Ticketmaster. Fans were redirected to the company’s TicketsNow reseller Web site, which charged many times the original prices.

‘Sexy Issue’

Diller said the Springsteen sale has become a “sexy issue” because Ticketmaster “has never been perceived to be on the side of angels.” He blamed processing problems by credit card company Visa Inc.

“Ticketmaster is not in the business of denying primary tickets to anybody in order to push them to the secondary marketplace,” Diller said.

Visa spokesman Joe Carberry said in an e-mail the credit- card company’s system was “fully functional” during the sale and that Diller’s comments were “inaccurate.”

The new name for the combined company is an acknowledgment that Ticketmaster is viewed negatively by the public, Azoff said.

“Ticketmaster is set up as the whipping boy for just about everything in the industry,” Azoff said in an interview.

Ticketmaster faces a Canadian lawsuit seeking C$500 million ($411 million) in damages for people who bought tickets in Ontario from TicketsNow. The suit alleges Ticketmaster broke provincial law that bars tickets from being sold above face value.

Lawsuits

Another suit filed in federal court in Los Angeles on Feb. 6 alleges Ticketmaster is illegally conspiring to monopolize the resale market for sports, concerts and show tickets.

Diller said the cases “have no merit.”

Live Nation reported long-term debt of $739.4 million as of Sept. 30. Ticketmaster, spun off from Diller’s IAC/InterActiveCorp in August, has long-term debt of $765 million.

The companies expect to complete the merger in the second half of this year, pending regulatory and shareholder approvals. Live Nation received financial advice from Goldman, Sachs & Co. and Deutsche Bank, and legal counsel form Latham & Watkins LLP.

J.P. Morgan was financial adviser to Ticketmaster, while Wachtell Lipton Rosen & Katz and Gibson Dunn & Crutcher LLP provided legal services. Allen & Co. delivered a fairness opinion to Ticketmaster.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

Last Updated: February 10, 2009 18:55 EST