MERGER FRONT: TALKS DRAG ON, NAMES ARE CHANGED
Yes, after a death march of devaluation that gave "synergy" a bad name, AOLTW is reverting to its shorter, arguably sexier maiden name of Time Warner. Though this going back to an earlier moniker formally seals the end of the mad dreams of media domination hatched in Dulles a few years ago, it wll also save reporters several keystrokes per day. TW will henceforth use its old stock symbol, TWX. For some reason, the name change will take six weeks.
Meanwhile, back in mergerland, grappling continues over how much Bertie would kick in to balance the valuation issues that continue to stymie progress in the talks.
Reports have filtered in in the past day or so that Bertie is prepared to offer AOLTW assets or cash worth more than $100m to secure a merger. After several months of talks, that could clear the final hurdle for a 50-50 combination of WMG and BMG.
The German group is reportedly considering offering some of its music publishing assets to Warner Music, which would be folded into the U.S. group's Warner/Chappell publishing business and then sold to meet regulatory concerns. AOLTW is expected to ask for about $1.2 billion for its pubbery.
The AOLTW board is due to receive an update on the music talks tomorrow from entertaintment chief Jeff Bewkes. Under the Bertelsmann proposal, AOLTW could realize the value from BMG's publishing assets pending a sale of an enlarged Warner/Chappell. People close to the talks said the focus was on what Bertelsmann would have to contribute to the deal in order to ensure it receives a 50% stake in the joint venture.
The New York Post said Bewkes had lost patience with Bertelsmann, and speculated that he may raise the possibility of making a deal with EMI. The board is unlikely to vote to continue or end talks with BMG, however.
The Wall Street Journal reported that WMG has asked BMG to contribute $150 million in cash to balance its contribution to a 50-50 joint-venture deal. BMG has reportedly said it will contribute no more than $100 million in cash.
Given that a WMG/BMG deal would be valued in the neighborhood of $2-2.5 billion, one might think a difference of $50 million wouldn’t really make a... um, difference. But then, some are saying debate still rages within Bertelsmann as to whether the company should be in the music business at all, given increasingly steep sales declines and challenging economic conditions. Bertie, of course, is still smarting from its forced $2.7 billion payout last year to Clive Calder for Zomba/Jive.
Observers close to the talks have become skeptical in recent days that a WMG/BMG deal can get done, using such colorful terms as negotiations being “on life support” and “stick a fork in it.” Insiders at EMI have continued to insist that such a deal will never close, prompting many to wonder whether they actually know something (an attempted WMG/EMI merger was blocked by regulators in 2000) or are merely indulging in wishful thinking.
A recent L.A. Times report, however, quotes one insider—likely from the German camp—as saying, “We still think we can do it.”
Meanwhile, a source tells Reuters, “It always comes down to a minor point in the end. Both sides are going to talk today again.”
