Sony takes up sole ownership of Sony BMG; buys out Bertelsmann for $1.2 billion

06 August 2008

Sony has enterd in to a deal to buy out the half it doesn't own in the the world's second largest music group, Sony BMG music venture from German media giant Bertelsmann in a $1.2 billion deal. While the German group's 50 per cent stake will be obtained for $900 million, it will also receive another $300 million for its share of the cash on Sony BMG's books.

The company will be renamed Sony Music Entertainment Inc. and will become part of Sony's US unit, according to a joint statement released on Tuesday. Citigroup Inc. advised Sony on the transaction, and JPMorgan Chase & Co. worked with Bertelsmann. The transaction is subject to regulatory approval, the companies said.

Sony says its outlay is just $600 million because it had not consolidated Sony BMG onto its balance sheet. Bertelsmann, also the owner of publisher Random House and broadcaster RTL, also will take over a limited amount of European music catalog assets from Sony BMG that total about $20 million per year.

The divestiture is also in keepinng with media giant Bertelsmann's reorientation of the music business of its Bertelsmann Music Group (BMG) towards music rights management.

While divesting its stake in the  joint venture to Sony, Bertelsmann is taking over the rights to selected European catalogues of the works of more than 200 artists from Sony BMG, which will continue to be distributed by Sony Music.

The acquisition of theses catalogues is an important step for Bertelsmann's proposed licensing and management platform for devloping and marketing music rights in Europe under the BMG brand, which it regatrds as an attractive proposition.