Bloomberg News

Universal Catalogs Said to Draw Interest From Providence

April 24, 2012

Pedestrians pass the headquarters of Vivendi SA in Paris. Vivendi faces scrutiny from regulators about the EMI deal, which is being investigated by the U.S. Federal Trade Commission and the European Union. Photographer: Antoine Antoniol/Bloomberg

Pedestrians pass the headquarters of Vivendi SA in Paris. Vivendi faces scrutiny from regulators about the EMI deal, which is being investigated by the U.S. Federal Trade Commission and the European Union. Photographer: Antoine Antoniol/Bloomberg

Vivendi SA (VIV)’s Universal Music Group received interest from companies including Providence Equity Partners and Bertelsmann AG for music-publishing catalogs it’s selling, according to three people familiar with the situation.

Among the parties that requested more information about the assets are independent music companies and other private-equity companies, the people said, declining to be named as the talks are private. Universal Music, which is divesting the catalogs to help finance its purchase of EMI Group, plans to reduce the number to about 20 to 30 candidates in the next two to three weeks, one of the people said.

“What people like about this business is that the publishing rights are still, over the long haul, likely to be good growth stories,” said Claudio Aspesi, a London-based analyst at Sanford C Bernstein. “The opportunity to make this a growth industry within music is significant and at the same time you have fairly predictable cash flows.”

Universal Music hired Bank of America (BAC:US) Merrill Lynch to sell classical, Christian and German schlager catalogs, and the assets may fetch as much as $200 million, a person familiar with the matter said last month. Universal Music, with headquarters in New York and Santa Monica, California, agreed in November to buying EMI’s recorded music unit for $1.9 billion.

Warner Music

Warner Music Group, which is owned by billionaire Len Blavatnik’s Access Industries Holdings Inc. and failed in its bid to buy EMI, isn’t bidding for the catalogs, two people said. Representatives for Universal Music, Providence, Bertelsmann and Warner Music declined to comment.

Vivendi, based in Paris, rose 1.9 percent to 12.88 euros at 12:19 p.m. in Paris. The stock had lost 24 percent this year before today, and has a market value of 16 billion euros ($21 billion).

Legal music-streaming services such as Spotify and Apple Inc.’s iTunes have helped record labels blunt the effect of plummeting CD sales, reviving investor interest in the sector. Even Sean Parker, whose Napster music-sharing service helped destroy music companies’ traditional business models, said last year that labels were “dramatically undervalued” and were poised to make gains as a result of new online applications.

Regulatory Scrutiny

EMI, the music company that owns Abbey Road Studios in London, was seized by Citigroup Inc. (C:US) in February 2011 after falling out of compliance with debt covenants, and subsequently sold. Sony/ATV, a joint-venture of Tokyo-based Sony Corp. (6758) and the estate of Michael Jackson, is purchasing EMI publishing for $2.2 billion to become the world’s biggest music publisher.

Bertelsmann board member Thomas Hesse said last month the company’s BMG Rights Management business, a joint venture with buyout firm KKR & Co., would “in principle” consider any catalogs coming to the market.

Expanding the BMG music-rights unit is part of Bertelsmann’s plan to boost growth at Europe’s biggest media company.

Vivendi faces scrutiny from regulators about the EMI deal, which is being investigated by the U.S. Federal Trade Commission and the European Union. The latter last month extended its review to Sept. 6.

Impala, a Brussels-based group of independent record labels, opposes the deal on worries of increased prices and reduced competition in the music industry. Vivendi Chief Executive Officer Jean-Bernard Levy has said that the combination will ultimately be good for the industry and musicians.

Sony/ATV this month won European Union approval for its purchase of EMI’s music publishing unit after it agreed to sell rights to chart hits by Robbie Williams and Ozzy Osbourne. The deal will give the Sony group control of EMI’s publishing rights to classics such as “New York, New York” and “Stand By Your Man,” adding to a portfolio of songs by Elvis Presley, the Beatles and Bob Dylan.

To contact the reporter on this story: Amy Thomson in London at athomson6@bloomberg.net Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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