that evolution."
Roger Ames
AOLTW SELLS MANUFACTURING OPS TO CINRAM INTERNATIONAL
The deal includes WEA Manufacturing., Warner Music Manufacturing Europe, Ivy Hill, Giant Merchandising and WEA’s physical-distribution operations. WEA’s sales and marketing operations are not part of the deal.
The announcement means that WEA head Jim Caparro, who had put together a consortium to bid on these assets, is the odd man out, as all but the above-mentioned sales and marketing divisions have been yanked out from under him. The AOLTW announcement makes no mention of Caparro’s post-deal status.
Under the terms of the agreement, Cinram will be the manufacturer, printer, packager and physical distributor for WMG, Warner Home Video and New Line Cinema in North America and Europe. Cinram has facilities in Canada, where the company is based, the U.S., Europe, and Latin America.
Said AOLTW Chairman/CEO Dick Parsons: "We're very pleased to have reached an agreement with Cinram that meets our strategic and financial objectives. The agreement ensures these businesses and their employees a great home while continuing to provide Warner Music Group, Warner Home Video and New Line Cinema with the highest quality manufacturing and distribution services in the industry. Just as important, it demonstrates the significant progress we've made toward fulfilling our commitment to reducing debt through free-cash-flow generation and the sale of non-strategic assets. With this agreement, as well as our legal settlement with Microsoft and the sale of our interests in Comedy Central and GM/Hughes, we have announced this year transactions generating nearly $3.8 billion in cash proceeds earmarked for debt reduction."
Added WMG Chairman/CEO Roger Ames: "We're in a period of rapid change in the music business and are working to make Warner Music Group as streamlined, efficient and agile as possible. The agreement we're announcing today is part of that evolution. Each of the companies being sold has a long and rich history as part of Warner Music, and each is a leader in its field. Cinram is a well-managed international company that not only recognizes the tremendous value of these assets but has demonstrated a commitment to quality and service. We're confident that these businesses and their employees will continue to thrive under Cinram's leadership, and we're pleased that Warner Music will continue to manufacture, package and distribute its products through Cinram."
According to AOLTW, if the Cinram deal had occurred at the beginning of 2003, operating income before depreciation and amortization for the six months ended June 30, 2003, would have been reduced by about $130 million.
The sale won’t be official until the requisite regulatory reviews in the U.S. and elsewhere have been completed.
Morgan Stanley acted as financial advisor on the deal, with Cravath, Swaine & Moore LLP handling the legal side.
