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Entertainment giant Live Nation plans to acquire Ticketmaster

The world’s largest  concert promoter  Live Nation Inc  plans to buy  Ticketmaster  Entertainment Inc for about $400 million in stock in a bid to create a company with dominant holdings inconcert promotion  and ticket sales.

But shares of both companies fell on Tuesday, amid concerns the acquisition would be blocked by U.S. antitrust regulators under the new Obama administration.

U.S. Senator Charles Schumer  slammed the deal ahead of its formal announcement on Tuesday, calling for a federal probe into Ticketmaster, the top U.S. ticket vendor.

“This merger would give a giant, new entity unrivaled power over concert-goers and the prices they pay to see their favorite artists and bands,” the Democrat senator from  New York  said in a statement.

The combined company will be called  Live Nation  Entertainment, and sell more than 150 million concert tickets a year, promote 22,000 concerts annually, and own more than 140 venues globally. It will also handle more than 200 big name artists including  Madonna,  Jay-Z, Miley Cyrus and the Eagles.

Ticketmaster shareholders will receive 1.384 shares of Live Nation common stock for each share of Ticketmaster they own, the two companies said in a joint statement. Live Nation will own 49.99 percent of the combined company, while Ticketmaster will hold the remaining 50.01 percent.

The deal, which the companies called a merger of equals, will create a company with an enterprise value of $2.5 billion including debt.

Live Nation  CEO Michael Rapino  will run the new company as CEO while  Ticketmaster Entertainment CEO Irving Azoff  will be executive chairman.  Ticketmaster chairman Barry Diller  will be non-executive chairman.

Live Nation shares fell 5.5 percent to $5.00 after the news while Ticketmaster dropped 5 percent to $6.25.

Based on Ticketmaster’s 57.21 million shares outstanding as of November 7, the deal values the company at $403 million. Based on Monday’s closing prices, the deal values Ticketmaster at a 11 percent premium.

The new company expects to save about $40 million by combining their ticketing, marketing, data centers and back-office functions.

But news of the merger has already raised questions with regulators, music fans, artists and record labels who believe the new company will have too much power over the live music business.

Besides Schumer, last week  Connecticut Attorney General Richard Blumenthal  said it would probe allegations that Ticketmaster worked with a subsidiary to inflate prices for tickets to see  Bruce Springsteen  inNew Jersey.

Complaints by regulators and consumers could delay and even derail the merger plan, even though the companies see the deal as a way to insulate themselves from the worsening recession.

Antitrust experts said the merger would face a bumpy road getting approval just weeks after  U.S. President Barack Obama  took office pledging to toughen antitrust enforcement.

Live Nation, which owns marquee name venues like  House of Blues  and the  Gibson Amphitheatre  in  Los Angeles, has been trying to diversify its business in the last 18 months in a bid to improve  profit margins.

Since then it has signed up artists like  Madonna  and  Jay-Z  to long-term multifaceted deals which include touring, merchandising, digital and recording rights.

Live Nation ended its 10-year ticketing relationship with Ticketmaster on Jan. 1, pledging to introduce its own service.

Profit margins in the touring business are around 4 to 5 percent compared with ticketing margins which are as high as 25 percent.

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