Bertelsmann Exits Sony BMG

As we reported a couple of weeks ago, the demerger of SonyBMG is now in effect.

Sony Corporation has reached an agreement to acquire Bertelsmann AG's 50% stake in Sony BMG, four years after the joint venture was created.

The demerged music company is to be called Sony Music Entertainment Inc and it will become a wholly owned subsidiary of Sony Corporation of America.

The deal has been anticipated since last month (see Billboard.biz, July 26). Sony Corporation will pay the German media company $1.2 billion, according to a filing with the U.S. Securities and Exchange Commission today. Bertelsmann will receive approximately $900 million for its 50% stake plus $300m of its share of cash on Sony BMG's balance sheet.

"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," says Sony Corporation chairman and CEO Sir Howard Stringer.

"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."

The joint venture was due to expire in August 2009. In a statement, Bertelsmann AG chairman and CEO Hartmut Ostrowski says, "The 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."

The buy-out remains subject to regulatory approval in certain jurisdictions. U.S. and European regulators could raise concerns about vertical integration at Sony, as the company's hardware business includes a joint venture with handset giant Ericsson for Walkman music-enabled mobile devices.

European independent music companies trade group Impala has already said it will continue to oppose the concentration of the market which it says resulted from the original Sony BMG arrangement.

Once the deal is completed, Sony Music Entertainment Inc will be home to labels such as Arista Records, Columbia Records, Epic Records, J Records Jive Records, RCA and Zomba with a roster of artists including Celine Dion, Alicia Keys, Bruce Springsteen, Usher and Justin Timberlake.

The two companies have agreed to continue to share the new company's manufacturing and distribution requirements between Sony's manufacturing subsidiary Sony DADC and Bertelsmann's services company, Arvato Digital Services GmbH, extending agreements with Arvato for additional terms of up to six years.

[Billboard]