- NEW YORK (Reuters) - Time
Warner Inc. (TWX.N: Quote, Profile, Research) on Monday said it would sell
its Warner Music business to a group led by media mogul Edgar Bronfman
Jr. for $2.6 billion, in a move to trim the media group's debts and signaling
a return of the former Seagram chairman to the music business.
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- The Bronfman group beat out a bid by EMI (EMI.L: Quote,
Profile, Research) for the recorded music portion of the business for an
estimated $1 billion.
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- By choosing the Bronfman bid, Time Warner is forsaking
$250 million to $300 million in cost savings it could have realized by
combining with EMI, home to such acts as The Beatles and Radiohead. Warner
Music artists include Madonna, Led Zeppelin and R.E.M.
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- On the other hand, Time Warner is getting more cash up
front by selling the entire business, which includes the music publishing
company, and will have an easier path to regulatory approval. In the past,
European and U.S. regulators have frowned on consolidation within the music
business.
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- Bronfman's team, backed by some of America's biggest
private equity houses including Thomas H. Lee Partners, is betting it can
slash costs and turn Warner Music around ahead of a comeback in sales,
a major challenge in an industry currently in decline.
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- Bronfman has had long ties to the music business, first
as a songwriter for the likes of Dionne Warwick and Celine Dion, and later
as head of Seagram when he bought entertainment group MCA from Japan's
Matsushita for $5.7 billion. On his watch, the renamed Universal Music
bought Polygram, creating the world's largest record company.
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- Bronfman merged his family's entertainment empire with
France's Vivendi three years ago, only to see the family fortune disintegrate.
When Vivendi put its entertainment assets on the block earlier this year,
Bronfman led a group to buy the assets back but was ultimately outbid by
NBC.
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- Hit by rampant piracy and competition from other entertainment
such as video games, music sales are expected to fall for the fourth year
in a row in 2004.
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- Earlier this month Sony Music (6758.T: Quote, Profile,
Research) agreed to merge with Bertelsmann AG's (BERT.UL: Quote, Profile,
Research) BMG.
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- © Reuters 2003. All Rights Reserved.
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