BERLIN (AP) _ German media company Bertelsmann AG (DBX:BTG4-STU) has signed a "definitive agreement" to sell BMG Music Publishing Group to Vivendi (NYSE:V) for US$2.09 billion, the companies announced Wednesday.
Bertelsmann said the transaction has been approved by the supervisory boards of both companies, and that Bertelsmann expects to receive the funds before the end of 2006.
France’s Vivendi said in a statement the acquisition had been approved by its management board and the supervisory board but was awaiting regulatory approval from various countries’ competition authorities.
BMG Music Publishing owns the rights to more than 1 million songs by recording artists such as Nelly, Maroon 5, Christina Aguilera, Robbie Williams, Justin Timberlake, Coldplay and Mariah Carey, as well as classic hits by the Beach Boys, Barry Manilow and other entertainers.
Vivendi SA’s Universal Music Group 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 catalogue 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 per cent 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 per cent market share, or fourth behind No. 1 EMI Music Publishing’s 19.75 per cent share.
Bertelsmann’s chief financial Thomas Rabe said the sale of the unit will help pay back the $5.76 billion of debt raised to finance the repurchase of the 25 per cent stake in the company held by Groupe Bruxelles Lambert.
"This transaction underscores our continued commitment to the strategy of reducing debt," Rabe said in a statement. "Bertelsmann remains fully committed to its recorded music business through its partnership with Sony in Sony BMG Music Entertainment."
BMG Music Publishing generated $475 million of revenue and $104 million of earnings before interest, taxes and depreciation and amortization for the twelve months ended Dec. 31, 2005. Bertelsmann expects that the sale will increase net income by approximately $1.28 billion.
"We are delighted with today’s announcement," said Gunter Thielen, Bertelsmann’s chief executive.
Although private equity groups as well as other media companies looked at the unit, Vivendi won out because it did not face the same anti-competition issues as its rivals, analysts said.
"The acquisition of BMG Music Publishing is a unique opportunity to grow our music publishing business and enhance the value of Universal Music Group at a time when the music market is improving, supported by technological innovations and digital sales," said Vivendi’s chief executive, Jean Bernard Levy, in a statement.