SONY YESTERDAY agreed to buy the 50 per cent stake in Sony BMG held by German media company Bertelsmann in a $1.2 billion (€775 million) deal that will give the Japanese consumer electronics group control of the world's second-largest record company.
The move ends a joint venture formed in 2004 by merging Sony Music and Bertelsmann's BMG as a response to the shock of the internet and digitisation that spread the power of recording and distributing music from the old hands to all comers.
Sony chief executive Howard Stringer said the reborn Sony Music would give the group "far more flexibility" to use music in its film and television units, and in electronics such as the PlayStation and Sony Ericsson Walkman mobile phone.
Artists on the new Sony Music label will include Celine Dion, Alicia Keys, Bruce Springsteen, Justin Timberlake, Usher and Jay Chou.
It will operate as a wholly-owned subsidiary of Sony Corporation of America.
Bertelsmann chief executive Hartmut Ostrowski said the move was "consistent with our new growth strategy" to reposition the company as a media-services group, possibly buying in to the growing educational market.
But both companies are under close scrutiny by their rivals - Sony as it emerges from a painful restructuring and Bertelsmann as it departs from the path of traditional media companies - and their take on the deal's price reflected this.
Sony said it would pay Bertelsmann $900 million and allow it to take $300 million in cash from Sony BMG, half that company's cash position. But people close to Bertelsmann stressed a "transaction value" of $1.5 billion.
This figure includes a tax break in the US and the value of a six-year CD-pressing contract with Bertelsmann. The Germans also receive some European music-rights catalogues, which are meant to be the core of a new music-rights business.
A person familiar with Bertelsmann said the Sony BMG deal - which is subject to approval by various cartel authorities - marked the end of portfolio pruning instigated by Mr Ostrowski when he became chief executive in January.
Yesterday's move and the sale of its book clubs in the US would allow Bertelsmann to cut by €1 billion financial debt that stood at €7.7 billion at the end of 2007. Bertelsmann has considered buying out minorities in its RTL TV unit, and looked at the UK's ITV.
People close to the company said education was the main focus.
- (Financial Times service)
