After months of speculation, an investor group led by former Seagram Co. Ltd. chairman Edgar Bronfman Jr. has agreed to purchase Time Warner Inc.’s Warner Music Group division for $2.6 billion in cash and other consideration.
The group included investment bank Thomas H. Lee Partners, Bronfman’s Lexa Partners and private-equity investors Bain Capital LLC and Providence Equity Partners Inc.
Bronfman -- who sold his Seagram entertainment assets (Universal Music, Universal Studios and cable networks USA Network, Sci Fi Channel and Trio) to Vivendi Universal in 2000 -- had been looking to get back into the entertainment business since resigning from the Vivendi board of directors earlier this year.
He made an offer (teaming up with Cablevision Systems Corp.) estimated at about $13 billion for Vivendi Universal Entertainment -- a bidding war that was eventually won by General Electric Co.’s NBC television unit in September. That $14 billion deal is still pending and is expected to close before the end of the year.
According to the Warner Music deal, Time Warner has the option to buy up to 15% of the company at any time during the three years following closing and as much as 19.9% under certain circumstances.
"Warner Music Group is one of the world's greatest recorded-music and music-publishing companies, and we have great faith in its potential for growth as an independent company and in the long-term opportunities of this industry," Bronfman said in a prepared statement.
Time Warner had been looking to unload Warner Music for months as part of a plan to sell off nonstrategic assets.
Earlier this year it sold its CD- and DVD-manufacturing, packaging and distribution units to Cinram International Inc. for $1.05 billion and its 50% interest in cable channel Comedy Central to Viacom Inc. (which held the other 50%) for $1.225 billion.
Time Warner said it would use the proceeds of the Warner Music sale -- expected to close in about 60 days -- for debt reduction. The media giant has made debt reduction a top priority, pledging to shed nearly $6 billion in debt by the end of 2004.
"Despite my personal fondness for the music business, as well as for all of our wonderful managers and music-group employees, I believe this transaction is clearly in the best interests of our company's shareholders," Time Warner chairman Richard Parsons said in a prepared statement.
"Not only will it greatly enhance our financial flexibility, but it will also enable us to pursue higher growth opportunities in our other lines of business," he added.
Bronfman will head up the music giant, which will retain the Warner Music name. Current Warner Music chairman and CEO Roger Ames will also stay with the company.
