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"I personally look forward to working with Roger Ames and his outstanding management team to build on Warner Music's strengths, including its distinguished tradition of entrepreneurship and artist development."
——Edgar Bronfman

TIME WARNER: BRONFMAN THE MAN

Officially Accepts $2.6 Billion Offer for Warner Music Group From Ex-Seagram Chief
It’s going to be a week of giving thanks at Time Warner, as the company has announced today that it is accepting the $2.6 billion bid from Thomas H. Lee Partners, Edgar Bronfman, Jr.'s Lexa Partners, Bain Capital and Providence Equity Partners to buy Warner Music, including Warner Chappell publishing. TV mogul Haim Saban, who was in, then out, then in again, was finally not included among the announced investment group. The company will continue to be called the Warner Music Group.

As part of the agreement, Time Warner will have the option to buy a 15% stake in Warner Music three years after the deal closes at a 25% discount from assessed market value. Time Warner will also have an option over a 19.9% share if Warner merges with another music company. Time Warner's debts have been pared to $24 billion after the company sold its manufacturing facilities to Canadian company Cinram for $1.05 billion last month.

Terms of the deal are being reported as $1.35 billion of equity and $1.2 billion of debt, with Boston-based private equity group Thomas H. Lee taking the largest single stake, at $600 million equivalent to almost half of the equity, with Bain at $350 million, Bronfman $250 million and Providence Equity $150 million, according to Reuters. Private equity group Quadrangle had been included, but is reportedly no longer in the mix. The deal is subject to the "customary regulatory reviews," according to the release, and is expected to take "up to 60 days" to close.

Hours before the announcement, bridesmaid EMI issued their own statement withdrawing from the running, and indicating they won't get back into the bidding even if a snag should develop in the Bronfman-led acquisition.

EMI Chairman Eric Nicoli, with nothing to show for three separate merger attempts now, admitted: "We have concluded that it is no longer possible to reach an agreement on terms which would be acceptable to both parties and in the interests of EMI's shareholders."

Now comes the part where everybody says nice things about the deal.

Bronfman: “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. We have brought together a highly sophisticated and well-financed group of investors to support the business. I personally look forward to working with Roger Ames and his outstanding management team to build on Warner Music's strengths, including its distinguished tradition of entrepreneurship and artist development. Together, we will continue to drive towards Warner Music's full potential.”

Thomas H. Lee Partners Managing Director Scott M. Sperling commented: “We look forward to partnering with Warner Music Group's talented management to build upon its world-renowned franchise and industry-leading brands. While we do not foresee an immediate upturn in the overall market for recorded music, we believe opportunities are emerging that bode well for the long-term future of the business and that Warner Music will continue to be in the forefront of capitalizing on these opportunities.”

Time Warner Chairman/CEO Dick Parsons added: “I'm very pleased that we are putting our music company in such capable hands. 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. Not only will it greatly enhance our financial flexibility, it also will enable us to pursue higher growth opportunities in our other lines of business. At the same time, we expect to continue to work closely with Warner Music, and we are happy to have the option to participate in the music industry's eventual recovery. We thank Roger Ames for his superb leadership of the Warner Music Group over the past four years, and offer him and all of our music colleagues our best wishes.”

Time Warner's Entertainment & Networks Group Chairman Jeff Bewkes said: “With this investor group's deep commitment to the music business, we believe this deal is the best outcome for the people of our music company, our stellar roster of artists and their millions of fans around the world. Even with this sale, we look forward to continuing to work closely with Warner Music through a number of productive relationships involving our other divisions. Finally, we appreciate the tremendous efforts of Roger and his management team in strengthening Warner Music and helping to make this deal happen.”

Warner Music Group Chairman/CEO Ames added: “I have every confidence that Warner Music will thrive under Edgar's leadership. His passion for the music business is clear, and his understanding of the creative process will be enormously important. It's an exciting chance to return to the independent roots that the music industry was built upon with what will be one of the world's largest independent music companies. These factors, along with the solid foundation we've built at the Music Group, mean we're very well positioned to take advantage of the technological advances that are spurring the industry's next phase of growth. I look forward to working with Edgar, as we strive to master the challenges our industry is facing.”

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