Bertelsmann AG will sell its 50% stake in music business Sony BMG to Sony Corp. in a US$1.2-billion deal, the companies announced today, giving the Japanese company full ownership of the joint venture whose roster of artists include Alicia Keys and Leona Lewis.
A statement released by the privately held Bertelsmann said the new company will be called Sony Music Entertainment Inc. and become a wholly owned subsidiary of Sony Corp. of America. The joint venture was created in August 2004.
In a filing with the U.S. Securities and Exchange Commission, Sony said Bertelsmann is receiving approximately $600 million in cash for a portion of its interest in Sony BMG.
Sony Corp. of America “will then purchase the remaining interest from Bertelsmann for approximately $600 million. As a result, Bertelsmann will receive approximately $900 million in value for its 50% stake, plus $300 million of its share of cash on Sony BMG’s balance sheet,” it said.
A person familiar with the deal speaking on condition of anonymity, said the deal, including tax advantages, was worth $1.5 billion.
Bertelsmann will also take over a limited amount of selected European music catalogue assets from Sony BMG, which represents about $20 million, or less than 1% of Sony BMG’s revenue last year.
Both companies will also continue sharing manufacturing and distribution requirements between Sony DADC and Bertelsmann’s Arvato Digital Service GmbH, extending their agreements for up to six years.
Once the deal, which is subject to regulatory approvals, is complete, Sony Music Entertainment Inc. will be comprised of music labels that include Arista Records, Columbia Records, Epic Records, J Records, Jive Records, RCA Records and Zomba. Its artists will include Celine Dion, Bruce Springsteen, Justin Timberlake and Usher, among others.
Bertelsmann chief executive Hartmut Ostrowski said the decision was made to sell the 50% stake after a thorough review.
“This move is consistent with our new growth strategy and will enable us to focus on our defined growth areas,” he said.
In March, Ostrowski said Bertelsmann would focus on investments in businesses with strong growth potential.
Last month, Bertelsmann said it would sell its North American book club business, including Columbia House and the Book-of-the-Month Club, to the privately held Phoenix, Arizona-based Najafi Companies. Financial terms weren’t disclosed.
It also said it would sell its Direct Group book and music clubs in several regions, including some countries in Europe and Australia.
Besides the sale of its stake in Sony BMG, Bertelsmann also said it was realigning BMG music toward rights management, taking over selected European catalogues of music rights from Sony BMG. The catalogues comprise the works of more than 200 artists and will continue to be distributed by Sony Music.
Bertelsmann said taking over the catalogues is an important step toward the planned establishment of a licensing and management platform for exploiting and marketing music rights under the BMG brand.
