Bertelsmann AG is getting closer to sealing a deal to sell its music publishing business, saying Thursday (Aug. 3) it expects to have a short list of potential suitors by month's end.

 

Last month, the German media giant narrowed the bidders for its BMG Music Publishing division for its BMG Music Publishing division to 15. By month's end, the company said it plans to have whittled that number down to a mere handful.

 

In addition to private equity groups, the bidders are expected to include such music firms as Vivendi's Universal Music Group, EMI Group and the Warner Music Group.

 

BMG Music Publishing is the world's third-largest music publisher. It generated €370 million ($468.5 million) in revenue last year from the copyrights to songs from artists including Coldplay, Robbie Williams, Christina Aguilera (pictured) and Justin Timberlake.

 

Some have put the likely price tag at about €1.5 billion ($1.9 billion). In an interview published Aug. 3 in Germany's Borsen Zeitung, Bertelsmann chief financial officer Thomas Rabe declined comment on that figure.

 

Rabe said he did not think the sale would be influenced by last month's surprise European Union ruling that tossed out the 2004 merger between Bertelsmann and Sony Corp.'s recorded music divisions (HR 7/14).

 

"Music publishing is a different business entirely and is not part of the (EU) ruling," he said.

 

Rabe added that he thought the Sony-BMG deal would be supported by the EU Commission in the fall after the companies' resubmission of the merger blueprints.

 

Bertelsmann is selling its music publishing unit, which accounts for 17.5% of its music business revenue, to help raise cash for a €4.5 billion ($5.7 billion) deal to take back the 25.1% stake held in Bertelsmann by Belgian investor Groupe Bruxelles Lambert.

 

Bertelsmann said Aug. 3 that it is setting up a bond issue to cover part of the cost of the buyback. Rabe signaled that it likely will amount to €500 million ($638 million) or more.

 

Source: http://billboardradiomonitor.com

BMG launches B2B music web portal for advertisers

 

LONDON - BMG Music Publishing, which publishes music from artists including Coldplay and Robbie Williams, has launched a B2B pop music web portal, enabling companies to choose music for film, TV and commercial productions.

 

The song search website, BMG Music Search, http://www.bmgmusicsearch.com, has been developed in conjunction with web consultancy bit10 and includes thousands of music tracks online.

 

Christopher Newman, head of new media at BMG, said: "The BMG Music Search website puts the BMG catalogue online, making it much easier for broadcasters, producers and advertisers to search, listen and licence thousands of pop and classical titles. Now clients can surf our website to find the tracks that they want and we can then send them a broadcast quality version of the song via a secure download link over email."

Viacom, Warner bid for BMG Music Publishing

 

LONDON (Reuters) - U.S. media conglomerate Viacom has teamed up with private equity group Apollo to submit an offer for BMG Music Publishing in a bid battle that could top 1.5 billion euros (1 billion pounds), sources close to the matter said.

 

BMG Music Publishing, which owns the rights to thousands of songs including hits by Christina Aguilera and Coldplay, is being sold by German media conglomerate Bertelsmann to help finance a 4.5 billion-euro buyback of a minority stake in the company.

 

The Viacom/Apollo group submitted its offer by a deadline of Thursday, the sources said on Friday. Warner Music Group also bid, and Vivendi's Universal Music was also planning to turn in an offer, the sources said.

Bertelsmann originally sent financial information about BMG Music Publishing to 15 suitors, and this group was later halved after the initial bidding.

 

Other suitors originally in the frame included a consortium of EMI Group with U.S. buyout firm Kohlberg Kravis Roberts & Co, although one of the sources said the pair did not submit an offer by Thursday's deadline. Sony Music had also decided not to bid, the sources said.

 

It was not immediately clear whether Chicago-based private equity firm GTCR, which sources said was mulling its options, had submitted a bid.

 

One of the sources said BMG, which is being advised by JP Morgan and Citigroup, would sift through the bids over the next week to ten days and then inform prospective buyers as to the next stage.

 

Music publishers earn money from CD and download sales, in what are known as mechanical royalties. They are also paid when songs are performed live or when they are played in films or TV programmes, which means publishers have been shielded from some of the piracy problems that have plagued the music industry.

 

Bertelsmann reported that music publishing generated 372.4 million euros of revenue in 2005, but it did not disclose operating profit or margins. The music-publishing arm, established in 1987, "had its most successful year to date, again generating double-digit return on sales," Bertelsmann said.

 

Universal Music has been considered by many in the industry as a frontrunner in the auction in part because it could likely find big cost savings by combining BMG's massive operation with its own. Although it is the world's biggest seller of recorded music, Vivendi's publishing arm trails some of its rivals. Vivendi also said earlier this year it is looking to expand its music-publishing business by acquisition.

 

BMG, Warner, EMI and the private equity firms all declined to comment or could not immediately be reached for comment.

Why the song had to come to an end for Bertelsmann

 

Bertelsmann's decision to sell the music publisher that owns copyrights to songs by Coldplay and Christina Aguilera stems from its controlling family’s desire to avoid a flotation.

 

The German company, controlled by the Mohn family and an allied foundation, was faced with the choice of buying back a 25 percent stake held by Groupe Bruxelles Lambert or being forced into going public.

 

Bertelsmann opted to pay €4.5 billion (£3 billion) to buy out the minority investor, but to cut down the extra debt built up, it said that it would sell BMG Music Publishing, raising about €2 billion to help defray the cost.

 

Liz Mohn, the head of the family, who is married to the ageing patriarch Reinhard, is thought to be suspicious of the public markets, concerned that a media company would come under pressure to make short-term decisions.

 

Thomas Middelhof, the company’s former chief executive was pushed out in 2002, after he made no secret of his desire to go for a flotation as a way of expanding the company. He was replaced by Gunther Thielen, the current chief executive, who is not willing to risk a breach with the family.

 

Although not an easy decision — Bertelsmann’s interest in music dates back many years — the German group reached the view that its investment in music had be sacrificed so it could maintain its leading position in European commercial television and English-language publishing.

 

As well as owning BMG, Bertelsmann owns Five, the British broadcaster, via its television subsidiary RTL, The Bill, through its production arm Fremantle Media, and The Da Vinci Code, via its publishing arm Random House. The German company is Europe’s biggest consumer media group, earning €1.04 billion last year.

 

Bertelsmann’s historic preference is to try to build market share ahead of going for maximum profitability, although under Herr Thielen, much of the business has been rationalised and its profit margins improved.

 

Bertelsmann had already signalled that it was losing interest in music when it moved its recorded music operation into a joint-venture with Sony. Once BMG is offloaded, the rationale for retaining a half interest in Sony BMG becomes limited, and few expect the joint-venture’s ownership to remain stable for long.

 

However, the German company is held back by Sony’s unwillingness to buy it out, amid its own difficulties, and the dismal commercial performance of Sony BMG.

 

Source: http://business.timesonline.co.uk

Vivendi near deal to buy BMG

 

NEW YORK (Reuters) - Vivendi SA is close to an agreement to buy Bertelsmann's BMG Music Publishing unit for about 1.6 billion euros ($2.1 billion), a source familiar with the deal said.

 

The deal is expected to be announced on Wednesday, the source said. It would make Vivendi the world's largest music publisher, ahead of EMI Group Plc's Music Publishing and Warner/Chappell Music.

 

The deal would be subject to U.S. and European Union regulatory approval.

 

However, separate sources told Reuters last week that the bids were due last Thursday and that it would take a week to ten days to sort through, with negotiations expected to continue through that period.

 

Bertelsmann declined to comment on Tuesday.

 

BMG Music Publishing, which owns the rights to thousands of songs including hits by Christina Aguilera and Coldplay, is being sold by German media conglomerate Bertelsmann to help fund its 4.5 billion euro buyback of a minority stake in the company.

 

Sources told Reuters last week that as well as Vivendi's Universal Music, U.S. media conglomerate Viacom had teamed up with private equity group Apollo to submit an offer, while Warner Music Group also turned in an offer by the deadline.

 

Goldman Sachs' private equity arm and Chicago-based private equity firm GTCR also submitted separate bids for BMG Music Publishing, people familiar with the sale said on Monday.

 

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Universal Music to buy BMG Music Publishing for $2.05 billion

 

Vivendi SA's Universal Music Group reached a tentative deal with German media company Bertelsmann AG to acquire BMG Music Publishing for $2.05 billion in cash, a person familiar with the deal said Tuesday.

 

The agreement was expected to be signed as early as Wednesday, according to the person, who spoke on condition of anonymity, citing the confidential nature of the negotiations.

 

BMG Music Publishing owns the rights to more than a million songs by recording artists such as Nelly, Maroon 5 and Coldplay, as well as classic hits by the Beach Boys, Barry Manilow and other entertainers.

 

Universal edged out a slate of rival bidders for the publishing unit, including Warner Music Group, the person said.

 

Warner Music Group declined to comment. A call to a spokeswoman for BMG Music Publishing in New York was not immediately returned.

 

Universal is already the biggest recorded music company in the world. The BMG publishing unit is expected to be absorbed by Universal Music Publishing Group, making it the largest music publisher by catalog size.

 

Music publishers generate revenue by licensing songs for use in movies, TV shows, CDs, video games, ringtones and other media. The companies also collect performance fees when songs are played on the radio or in public venues such as clubs.

 

During the second quarter of this year, songs held by BMG Music Publishing accounted for 7.3 percent of the airplay on U.S. radio stations, or fifth overall, according to Nielsen Broadcast Data Systems.

 

In the same period, Universal Music Publishing had a 10.23 percent market share, or fourth behind No. 1 EMI Music Publishing's 19.75 percent share.

 

Bertelsmann put its music publishing business up for sale earlier this year to help finance a $5.8 billion bridge loan used to buy back a 25.1 percent stake held by Groupe Bruxelles Lambert.

 

The move, announced in May, freed Bertelsmann from the prospect of an initial public offering for the stake.

 

The BMG Music Publishing sale is subject to regulatory approval by U.S. and E.U. officials.

 

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