Time Warner seen getting music offer
By Jon Friedman, CBS.MarketWatch.com
Last Update: 11:35 AM ET Nov. 18, 2003
NEW YORK (CBS.MW) -- Time Warner, the world's largest media company, is expected to receive a $2.5 billion offer for its music business from entertainment industry investors Edgar Bronfman Jr. and Haim Saban, according to media reports.
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Mia Carbonell, a Time Warner spokeswoman, declined comment Tuesday. Time Warner slipped a penny to $15.63 in recent stock trading.
Industry sources say Time Warner (TWX: news, chart, profile) could choose between an offer from the investor group and another proposal made by music foe EMI Group, when it board of directors convenes for a Thursday meeting.
Time Warner has managed to pare about $5 billion from its debt burden by disposing of extraneous businesses, ranging from sports teams and half of the Comedy Central cable-television channel to its CD/DVD manufacturing arm. Time Warner now has about $24.1 billion in debt, Carbonell said.
Warner Music, the fourth-largest music label in the world, owns such high-profile acts as Madonna, R.E.M., and Triumph The Insult Comic Dog.
Assuming a deal comes to pass, Time Warner would be exiting the industry at a tough time for the music industry. CD sales have plummeted in recent years because of the renewed popularity of free file-sharing services like KaZaa, a softer retail climate, and intense competition from DVDs and video games.
Forrester Research went so far as to predict the demise of CD sales because consumers would instead opt to get entertainment at home via their computers and skip the trip to the mall.
The industry slump sparked a proposed deal between Sony Music and Bertelsmann's BMG, announced earlier in the week.
Meanwhile, Time Warner Chairman Dick Parsons has been eager to reduce the size of its mammoth debt load and has publicly pledged to accomplish this goal as a way to build investors' confidence on Wall Street.
Parsons has sought to shed unnecessary businesses, possibly such as music, which has frequently caused headaches for Time Warner over the past few years.
As recently as Monday, the New York Times reported in detail about a rift between Time Warner's music operation and recording star Madonna over how much ownership Time Warner will exercise over Madonna's label, Maverick Records.
For example, Time Warner has also been criticized for the stewardship of the label in separate matters. It was said to have overpaid for the rock band REM at a time when the group seemed to lose some measure of its popularity in the U.S.
For Bronfman, an opportunity to buy the Time Warner music business would give him an opening back into the entertainment industry. He sold Seagram's U.S. entertainment interests in its Universal movie and music businesses to France's Vivendi Universal (V: news, chart, profile).
When Vivendi's fortunes sank under a massive debt load and discharged its unsuccessful head Jean-Marie Messier, the company sought to sell the Universal assets. Bronfman lost out in an auction to General Electric's NBC (GE: news, chart, profile) television subsidiary and has been seeking to make a deal for himself.
Saban is well known for assembling a children's entertainment business that includes the Mighty Morphin Power Rangers. Earlier this year, he obtained Germany's biggest commercial TV operation.
EMI has on its label such classic-rock acts as the Beatles, whose album "Let It Be -- Naked" hits the stores this week and is expected to attract a big following, and the Rolling Stones, which had a splash with its "Forty Licks" set in the past year.
EMI, the third-largest music company, had been offering $1 billion for a majority position in Warner's recorded music division.
Reuters and Dow Jones reported the speculation overnight.
Jon Friedman is media editor for CBS.MarketWatch.com in New York.
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