COLUMBIA HOUSE, CDNOW SAY "LATER"
The planned purchase of online music retailer CDNow by Columbia House, the mail-order music business jointly owned by Time Warner and Sony, is dead.
"We are obviously disappointed that the merger originally envisioned last July will not be completed," said CDNow President/CEO Jason Olim. "But if Columbia House will reconsider, I’m prepared to send them the entire Uriah Heep catalog, free of charge."
Olim said Sony and Time Warner have committed $51 million to CDNow by providing an additional $21 million in cash as an equity investment and converting an existing $30 million short-term loan into long-term convertible debt.
Despite that commitment, industry insiders see the collapsed deal as bad news for CDNow, which has retained Allen & Co. to explore other business options.
Olim told Reuters that the company will attempt to reduce costs by almost a third in the coming year as a result of the collapsed merger.
The original terms of the merger were never disclosed.
CDNow's stock has tumbled over the past year with the per share price floating in the mid-20s in July of 1999. At presstime, the stock closed at $8 a share.
Insiders cite the pending AOL merger with Time Warner as a factor in the breakdown of the deal.
CDNow's overall 1999 revenue was $147 million. Its fourth-quarter revenue was $53.1 million. The company's net loss for the fourth quarter was $25.7 million.
