It’s a big day in music publishing with the closing of the $2.2B cash and debt deal by a consortium led by Sony/ATV — Sony’s partnership with Michael Jackson’s estate — for one of the industry’s crown jewels: EMI Music Publishing. The pact gives Sony/ATV about 1.3M additional titles to administer including pop classics “My Girl,” “Bohemian Rhapsody,” “Every Breath You Take,” “You’ve Got A Friend,” “New York, New York,” “Over The Rainbow” and “Have Yourself A Merry Little Christmas.” Sony/ATV, which already had about 750,000 titles — including The Beatles’ catalog — paid $320M in cash for 40% of the property. Others backing the EMI publishing acquisition include David Geffen, Mubadala Development Company PJSC, Jynwel Capital, and the Blackstone Group’s GSO Capital Partners. ”Music publishing, along with the rest of our entertainment companies, has been a bright spot in our business portfolio, and we expect that trend to continue with this important acquisition,” Sony CEO Kazuo Hirai says. The Sony/ATV-led group bought the EMI collection from Citigroup. The bank took control of EMI last year after its previous owner, Guy Hands’ leveraged buyout firm Terra Firma, was unable to make payments on the debt he took on to buy the music company in 2007 at the height of the private equity bubble. The FTC approved the Sony/ATV deal last week but has yet to rule on Citigroup’s agreement to sell EMI’s music production operation to Vivendi’s Universal Music for $1.9B.
Universal Music has already announced that it will pay $1.9B for the recorded music operation. We’re told Sony’s teed up to disclose that it landed EMI’s music publishing business for $2.2B. The deals end a drawn-out process to decide the fate of a company whose hitmakers include The Beatles and Katy Perry. But the companies may face tough questioning from European antitrust officials, and possibly U.S. ones as well. Impala, which represents independent European music companies, said this week that deals with Universal and Sony — two of the industry’s largest companies — ”would be the worst possible outcome of the EMI negotiations — for music, those who make it and those who want to access it.” Citigroup has made it clear to bidders that it expects to be paid no matter what; buyers would have to assume all the financial risks for any deal that’s blocked.
If the transactions go through, then it could mean big problems for Warner Music, which industrialist Len Blavatnik bought for $3.3B early this year. “Warner’s really small now” compared to Universal and Sony, says one long-time industry exec. “They’re the third port of call for every artist, and won’t have the same leverage with Walmart for shelf space.” The publishing deal with Sony also raises questions for BMG, which has been on an acquisition tear with financial support from private-equity firm Kohlberg Kravis & Roberts. BMG has wanted to build scale, and a deal with EMI — the No. 1 music publisher — would have capped that effort. Some industry players wonder whether KKR now will look to sell its interest in BMG.