Vivendi’s Universal to buy BMG Music Publishing

FRANKFURT, Sept 6, 2006 (AFP) – Universal Music, the world’s number one seller of recorded music, said Wednesday it was set to become the world’s top music publisher thanks to a 1.63-billion-euro (2.0-billion-dollar) deal to buy Bertelsmann’s BMG Music Publishing unit.

Universal, owned by French media group Vivendi, beat rival bids from the likes of Warner Music to buy BMG Music Publishing, the world’s third-largest music publisher with rights to one million songs including hits by Coldplay and Justin Timberlake.

Bertelsmann and Universal also announced that they had settled their long-running legal dispute over the now-defunct music file-sharing service, Napster.

Music publishers such as BMG Music Publishing own the rights to lyrics and melodies which they licence to record companies. They also usually own the rights to further exploitation of the music in films and television.

The Vivendi-Bertelsmann deal still needs to be approved by the US and European regulatory authorities and is likely to face opposition from independent record labels, who are critical of consolidation of the industry.

Universal would leapfrog EMI of Britain to become the biggest music publisher if the deal is completed.

Recently, IMPALA, the independent music companies’ association, said that the sale of any major publisher to another would strengthen existing collective dominance in the market.

“IMPALA takes the view that any such move would be unable to obtain regulatory approval,” the group said.

The 2004 merger of Bertelsmann’s recorded music business with that of Sony into Sony BMG was recently annulled by the European Court of Justice.

Nevertheless, both Bertelsmann and Universal were confident Wednesday that their music publishing deal would get regulatory approval, since there is less consolidation in the music publishing business than in the recording industry.

Bertelsmann chairman Gunter Thielen estimated that the combined business would have a global market share of around 25 percent.

For Bertelsmann, the deal represents an opportunity to raise money to help pay for the acquisition of a stake of its own shares previously held by Groupe Bruxelles Lambert (GBL), the holding company of Belgian financier Albert Frere.

Buying GBL’s stake was the only way for Bertelsmann to prevent a forced stock market listing, since GBL had the option to float its 25-percent stake in Bertelsmann on the stock exchange.

“The sale of BMG Music Publishing allows Bertelsmann to repay a significant portion of the 4.5 billion euros of debt raised to finance the repurchase of GBL’s 25-percent stake in Bertelsmann,” said chief financial officer Thomas Rabe.

Bertelsmann said it expected to receive the funds by the end of the year, which would boost the group’s net profit by 1.0 billion euros in 2006.

BMG Music Publishing generated revenues of 371 million euros in 2005 and booked operating profit, as measured by earnings before interest, tax, depreciation and amortisation (EBITDA) of 81 million euros.

The sale would not diminish future group earnings, Bertelsmann insisted.

“The divestiture will have a limited impact on our future results as BMG Music Publishing has been run independently and accounts for just two percent of consolidated group revenues,” the parent company said.

Also on Wednesday, Bertelsmann said it had settled its ongoing legal dispute with Vivendi’s Universal Music over Napster, the now defunct music file-sharing service.

Under the terms of the settlement, Bertelsmann agreed to pay 60 million dollars but insisted that it was not admitting any liability in agreeing to the settlement with Universal.

Universal filed a lawsuit against Bertelsmann in 2003 over the German company’s funding of Napster.

Bertelsmann invested millions of dollars in Napster in the hope of turning it into a legitimate, profitable subscription service.

Copyright AFP

Subject: French news