Bertelsmann Shopping Its Share in Sony BMG, Sources Say
NEW YORK _ German media giant Bertelsmann is looking to drop its 50 percent interest in music giant Sony BMG in an effort to raise some quick cash.
Bertelsmann has approached Sony about unwinding their partnership in the world’s second biggest music label, sources said Monday.
If a deal gets done, Bertelsmann could get between $2 billion and $2.5 billion for its share of Sony BMG, whose artists include Beyonce, Celine Dion, Bruce Springsteen, Jennifer Lopez and Usher.
Bertelsmann spokeswoman Liz Young and Sony spokeswoman Ann Morfogen declined to comment.
Bertelsmann needs the money to buy out a big shareholder, Groupe Bruxelles Lambert, which is pressing for a public offering of the media empire.
Bertelsmann’s founders, the Mohn family, want to keep the company private.
Only a couple months ago, Sony and Bertelsmann were feuding over who would manage Sony BMG.
Bertelsmann won that battle and succeeded in installing one of its executives, Rolf Schmidt-Holtz, in the CEO post. Ex-Sony BMG CEO Andrew Lack, who came from Sony, was moved upstairs to the chairman’s office.
Lack, the former president of NBC who was handpicked by Sony chief Howard Stringer, now supervises public policy issues for Sony BMG. He also handles the company’s start-up film division. It is about to release a movie called “Raggaeton.”
With Bertelsmann under pressure to raise cash, the tables are turning in Sony’s favor.
“Bertelsmann embarrassed Sony,” a media insider said yesterday, referring to the boardroom brawl. Now, “the leverage is with Sony.”
But a Sony buyout wouldn’t necessarily mean that Lack would return to the CEO post, insiders said Monday.
Sony has the first right of refusal on any deal. Under one possible scenario, the Japanese electronics giant would bring in private equity firms to help foot the bill for the buyout, as it did when it acquired MGM.
Sony does “very strategic deals” where they are a “minority investor,” said a source close to Sony.
If Sony passes on a deal, Bertelsmann might look to a third party to buy out its half share in the music company. But anyone who came in would have to see eye to eye with its future partner, Sony.
“Who wants to put up a significant amount of cash to be a 50-50 partner with Sony?” said a former senior music executive.
Sony and BMG joined forces in an effort to combat serious challenges facing the music industry, which has been hit by rampant piracy and declining sales.
But last year, Sony BMG’s sales fell by 16.5 percent. Cost-cutting helped improve profits.
In addition to selling its share of Sony BMG, Bertelsmann is also seeking to sell its music publishing division. Possible takers include Universal Music Group, the world’s largest music company.
___
(c) 2006, New York Daily News.
Visit the Daily News online at http://www.nydailynews.com/
Distributed by Knight Ridder/Tribune Information Services.
For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.