Warner Music May Get Sold to BMG (1 Viewer)

[Lee Scoggins]

Friends,

There was an interesting story on page B9 in today's Wall Street Journal about AOL near a deal to sell Warner's CD manufacturing (WEA) to two possible parties:

(1) A group of investors led by Jim Caparro, CEO of WEA, and private equity investors for $1 billion-AOL needs the money to pay down debt.
(2) Cinram International.

It also stated that AOL has been negotiating the sale/merger of Warner to Bertelsmann's BMG unit. It stated that "the talks were progressing, a person familiar with the situation said, although a deal is thought to be several weeks away". There is speculation that this would raise another $1 billion for AOL, the parent.

I post this because it could have an impact on DVDA's future, potentially positive if it combines with the additional market share of BMG. BMG must remain committed to the hirez format, however, and I believe it has been struggling financially as well.

It will be interesting to see what happens - hopefully this move will strengthen high resolution formats in one way or another. Maybe we will see additional BMG titles in either SACD or DVDA.

What's your take?

 

[Lee Scoggins]

No other opinions?

 

[Ben_wood]

Lee, would BMG music club sell SACDs and DVD-As, if this deal goes through? If so, I'm all for it!

 

[John Kotches]

Well Lee, if your introductory line is accurate, then your topic is sensationalism at work.....

The Topic:
Warner Music May Get Sold to BMG

The Intro Line:
AOL near a deal to sell Warner's CD manufacturing (WEA) to two possible parties

These are radically different and the implication of your topic is that the immensely valuable catalog of Warner Music is up for sale -- when it is some manufacturing capacity that looks

Would you mind explaining the apparently substantial discrepancy between the two?

Regards,

 

[Phil A]

Here is the actual story:

"Two bid for Warner's DVD/CD unit-sources


NEW YORK, July 15 (Reuters) - Two bidders have emerged to buy AOL Time Warner Inc.'s CD and DVD manufacturing business, with a deal possible as early as next week, people familiar with the matter said on Tuesday.

Cinram International Inc. and a group led by Jim Caparro, head of WEA Inc., the company's Warner Music division that includes the manufacturing operations, submitted bids by last Friday's deadline, one source said.

A deal for the business will likely be announced before AOL Time Warner reports earnings next Wednesday, the source said. The operation is expected to fetch $1 billion for AOL Time Warner, which is trying to pare its $26 billion in net debt, the source added.

The bidders were first identified by the Wall Street Journal on Tuesday. The newspaper also reported Caparro was backed by private equity groups Apollo Advisors LP and Thomas H. Lee Partners.

A Thomas H. Lee spokesman declined to comment, and an Apollo Advisors spokesman was not immediately available for comment.

Executives at Cinram, a Toronto-based manufacturer of DVDs and cassettes, could not be reached immediately, and spokesmen for AOL Time Warner and Warner Music declined to comment. Caparro also declined to comment.

Deutsche Bank and J.P. Morgan are also backing the Warner executive's bid, one source familiar with Caparro's bid said.

AOL Time Warner is looking to sell other nonessential assets. Its Turner Broadcasting unit is close to selling the Atlanta Hawks professional basketball team, Atlanta Thrashers hockey team and operating rights to Philips Arena in Atlanta, a source familiar with that matter told Reuters on Monday. Its Atlanta Braves pro baseball team is also on the market.

The company has also been holding talks about a joint venture between Warner Music and Bertelsmann AG's BMG recorded music businesses, and a deal could be hammered out as early as within the next couple weeks, sources familiar with the matter said."

 

[John Watson]

The antics of big business make it easy to understand why it is so susceptible to satire.

AOL acquired Time Warner just a couple of years ago ("Convergence, doncha know").

It's amazing any good recordings get to market, and not surprising that they cost so much.

 

[Lee Scoggins]

It also stated that AOL has been negotiating the sale/merger of Warner to Bertelsmann's BMG unit. It stated that "the talks were progressing, a person familiar with the situation said, although a deal is thought to be several weeks away".

I should have made it more clear that it was the Warner music catalog perhaps.

The story addressed the music catalog as well which is why I thought it was important to post here as that is big news.

 

[Lee Scoggins]

Here is the actual story

Thanks Phil but this is a different story from the WSJ coverage. Actually the WSJ article addressed the Warner music catalog as well. Unfortunately WSJ is a paid site so I don't have a link to the story.

 

[Lee Scoggins]

John Kotches,

Did you read the above reply?

 

[John Kotches]

Lee,

Yes I did.

It sounds like the details are quite unclear.

In some circles, it's the manufacturing capacity, in some circles it's the label.

I might be wrong here, but isn't US$1billion a bit low for Warner Music Group? I would have expected an order of magnitude higher.

Regards,

 

[Lee Scoggins]

In some circles, it's the manufacturing capacity, in some circles it's the label.

I think I can clear this up...I tried to make it apparent in my first post. Here's the skinny:

The CD manufacturing facility(s) is almost a done deal. Down to two bidders and AOL is a motivated seller.

The Warner Music division is in ongoing talks with BMG for also a billion. Yes, low but AOL has real financial issues so this falls under the firesale category.

So I posted this in part to let people know that the WSJ which is quite accurate on merger news historically has said a deal may be just weeks away.

Unfortunately what is confusing you is Phil's story that does mention the sale of Warner Music but as a joint venture. The WSJ has been mentioning sale in the last two stories so I'm going with that given the source. It also makes sense due to the need for cash to pay down debt at AOL.

This, of course, is big news for the music business and could alter the landscape significantly for high resolution releases and Warner releases in general.

I feel that Warner has been sitting on too much gold so I welcome a potentially more enlightened owner of the catalog. Then we may see some Van Morrison releases that are exciting.