Sony Purchases Bertelsmann’s 50% Of Sony BMG

DEAL VALUED AT $1.2 – $1.3 BILLION

UPDATED: Sony has agreed to acquire Bertelsmann’s 50% stake in Sony BMG and will rename it Sony Music Entertainment Inc. (SMEI). The deal is valued at $1.2 – $1.3 billion and is still subject to regulatory approval including an ongoing EU review of the original 2005 merger.

Bertelsmann had originally sought $1.5 billion for its stake in the partnership, but falling industry wide revenue projections (read about WMG’s troubles) led the lower price.  Sony was reportedly interested in completing the purchase to get out from under an unwieldy partnership as it tried once again to integrate the music company with its other entertainment companies and products.

Under the deal, the parties will continue to share…

current manufacturing and distribution arrangements between Sony’s
manufacturing subsidiary, Sony DADC, and Bertelsmann’s services
company, Arvato Digital Services GmbH  by extending the agreements with
Arvato for additional terms of up to 6 years.  In addition, Bertelsmann
will take over certain unspecified "European music catalog assets" from
Sony BMG.

Once the transaction is completed SMEI will include such labels as Arista, Columbia, Epic, J, Jive, RCA
and Zomba.  Key recording artists will include Celine Dion, Alicia
Keys, Yo-Yo Ma, Bruce Springsteen, Justin Timberlake, Usher and Jay
Chou.

FROM THE PRESS RELEASE:

"Music has been a vital and vibrant part of Sony’s culture for over twenty years.  This acquisition will allow us to achieve a deeper and more robust integration between the wide-ranging global assets of the music company and Sony’s products, operating companies and affiliates.  It enables us to offer a total entertainment experience to consumers," said Sir Howard Stringer, Chairman and CEO, Sony Corporation.  "Over the past four years, Sony BMG has undertaken a very successful restructuring, streamlined operations and developed innovative digital partnerships that ensure it will continue to be a leader in the creation and distribution of music worldwide.  It is an organization rich in talent, ideas and enthusiasm, and is a strong fit with our overall business strategy."

"After a careful and thorough review, we made the strategic decision to sell our investment in this joint venture to Sony, a step that we believe will benefit the stakeholders of both our companies," stated Hartmut Ostrowski, Chairman and CEO of Bertelsmann AG.  "This move is consistent with our new growth strategy and will enable us to focus on our defined growth areas.  Sony has been an excellent partner, and they are the right company to take this business to the next step and ensure that it realizes its full value and potential.  We look forward to witnessing Sony Music Entertainment’s exciting future under Sony’s ownership."