A consortium of investors led by former Universal Music chief Edgar Bronfman Jr. said it struck a US$2.6 billion deal to buy Warner Music Group from Time Warner Inc, edging out Britain's EMI Group PLC, which withdrew its bid at the last minute.
The deal, which also includes Time Warner's Warner/Chappell Music publishing business, would create one of the world's largest independent music companies and include some of the industry's biggest artists, such as Madonna, R.E.M. and the Red Hot Chili Peppers.
Bronfman, who oversaw a great expansion at Universal as its chief between 1995 and 2000, will lead the company. Bronfman sold Universal before the impact of digital technology and the Internet helped spur a three-year slump in CD sales industrywide.
Bronfman sold the company, a unit of his family's longtime liquor business, Seagram Co, to Vivendi in 2000. He tried to buy back Vivendi this year, but lost out to General Electric Co's NBC.
"Warner Music Group is one of the world's greatest recorded music and music publishing companies, and we have great faith in its potential for growth as an independent company and in the long-term opportunities of this industry," Bronfman said on Monday. "We have brought together a highly sophisticated and well-financed group of investors to support the business."
Current Warner Music chairman Roger Ames was slated to take the No. 2 spot at the new company. More details on senior management and the composition of the board were to be announced later.
The deal was expected to close in January, according to the Bronfman investor group, which includes Boston-based private equity firms Thomas H. Lee Partners, Bain Capital and Providence Equity Partners Inc.
The Bronfman-Time Warner deal was expected to slash Time Warner's net debt by about US$2.6 billion, the company said.
"I'm very pleased that we are putting our music company in such capable hands," said Time Warner Chairman and CEO Dick Parsons. "Despite my personal fondness for the music business as well as for all of our wonderful managers and music group employees, I believe that this transaction is clearly in the best interests of our company's shareholders."
So far this year, Warner Music Group has 17.91 percent of overall market share, second only to Universal Music's 27.99 percent, according to data compiled by Nielsen SoundScan.
Sony Music Entertainment ranks third with 14.86 percent and BMG is fourth with 14.63 percent. EMI Group ranks fifth with 10.8 percent.