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The private equity firm had reportedly been in talks with Warner Music about engineering a joint bid for EMI, but those discussions then turned toward K.K.R buying Warner outright.
WMG FOR SALE?
Record Label Hires Goldman Sachs to Seek Out Buyers, While It Simultaneously Explores Acquiring EMI
Is Junior looking to get out of the record business or get further into it?

The N.Y. Times is reporting that Edgar Bronfman has hired Goldman Sachs to seek out potential buyers for Warner Music Group, as he simultaneously explores acquiring EMI.

The decision to hire the investment company comes after several suitors, including the buyout firm Kohlberg Kravis Roberts, recently approached management about buying the venerable music group.

Goldman has recently begun making pitches to financial investors and media companies about buying Warner.

One possibility is that Warner will sell Warner/Chappell, its prized publishing arm

A separate set of bankers within Goldman, meanwhile, has been working on a potential acquisition of EMI by Warner, reaching out to Citigroup, which may well take control of the British music company if it fails to meet its payments.

K.K.R’s interest in Warner Music is related to expanding BMG Rights Management, a joint venture it owns with Bertelsmann. The private equity firm had reportedly been in talks with Warner Music about engineering a joint bid for EMI, but those discussions then turned toward K.K.R buying Warner outright, according to one of the executives involved in the process.

The unusual two-track process highlights the desire of Warner’s private equity owners to either make a big strategic move and double down on the music business by buying EMI or cash out, more than seven years after they acquired the company from Time Warner.

Warner Music, the only pure music company that is publicly traded, has a market value of $731 million after Thursday’s stock market close and has a total enterprise value of $2.3 billion.

Bronfman and a group that also included Bain Capital, Thomas H. Lee Partners and Providence Equity Partners, purchased Warner Music from Time Warner in March 2004 for $2.6 billion in cash. The company went public in 2005, and while only a small percentage of Warner’s stock is in public hands, the investors have already profited through hefty dividend payouts.

In a letter to shareholders sent last week, Mr. Bronfman wrote, “clearly many obstacles lie ahead, but our confidence in the company’s future prospects is based on our consistent track record and our proven ability to outperform the rest of the industry.”

Unlike newspapers and magazines, the music industry has developed a feasible model for selling music online through services such as Apple’s iTunes—even if revenues have declined and piracy remains rampant.

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