The Warner Music Group agreed on Friday to sell itself to the investment vehicle of the Russian-born billionaire Len Blavatnik for about $3.3 billion, including the assumption of debt, ending a sales process that lasted months for the music record company.
Under the terms of the deal, Blavatnik’s Access Industries will pay $8.25 a share for Warner Music. That is a 4.4 per cent premium to the company’s Thursday closing price of $7.90, and about 34 per cent higher than Warner Music’s average share price over the last six months.
Edgar Bronfman Jr, Warner Music’s chairman and chief executive, and the private equity firms THL Partners and Bain Capital, which together own 56 per cent of Warner Music’s stock, have agreed to support the deal.
“We are delighted that Access will be the new steward of this outstanding business,” Bronfman said in a statement. “They are supportive of the company’s vision, growth strategy and artists, while bringing a fresh entrepreneurial perspective and expertise in technology and media.”
Shares in Warner Music have jumped 40 per cent this year as investors eagerly anticipated a sale of the company.
The sale may eventually lead to more consolidation in the music industry. Many consider Blavatnik’s next step to be an attempt to combine Warner Music’s record-music arm with that of the EMI Group, which Citigroup owns after foreclosing on its previous owner.
That would shrink the number of big global record companies to three from four, and perhaps the combined Warner-EMI entity would find enough cost savings to become financially healthy.
Since putting itself up for sale in January, Warner Music had attracted dozens of potential buyers, from other music companies to billionaires seeking a trophy acquisition.
By this week, three suitors had emerged with strong prospects: Blavatnik; Tom and Alec Gores, brothers who run their own private equity shops; and Sony/ATV Music Publishing, which had been working with the billionaire Ronald O Perelman and the investment firm Guggenheim Partners.
Of these, Blavatnik had long been seen as the most likely winner. A former Warner Music board member, he has retained both close ties to top company officials like Bronfman and an equity stake.
“I am excited to extend my longstanding involvement with Warner Music,” Blavatnik said in a statement. “It is a great company with a strong heritage and home to many exceptional artists.”
Since immigrating to the United States in 1978, Blavatnik has become one of the world’s richest men through his varied investments, primarily in the industrial sector. Access owns stakes in companies including Warner Music; TNK-BNP, the Russian oil giant; and LyondellBasell, a chemical company that has rebounded from bankruptcy. (Blavatnik is fending off a lawsuit by that company’s creditors, who allege that his takeover of the chemical maker larded it with an unsustainable amount of debt.)
Other potential bidders complained during the sales process that they felt that the end result already seemed oriented toward a win by Blavatnik, people briefed on the matter said previously.
Yet Blavatnik will still have a challenge on his hands, as the recorded music industry continues its battle to stem declining sales. Digital music downloads have been rising, but not nearly enough to replace the revenue lost from falling CD sales.
©2011 The New York
Times News Service
