After weeks of speculation, Sony BMG has collapsed and Sony has bought out the fifty percent share held by Bertelsmann AG for $900 Million USD. The Sony BMG experience hasn’t been exactly the most favorable business merger, with numerous obstacles from European courts and software debacles that left consumers scarred. While it isn’t exactly clear if the name will change immediately, consumers should expect to see that Sony BMG Music Entertainment will simply become Sony Music Entertainment Inc. The deal was announced today by Sony and was not a surprise to many as Bertelsmann AG had been shopping for a potential buyer with an asking price of $1.5 Billion. This should be a decent asset gain for Sony, as their 1Q results for FY08 had left many people speculative as to how Sony can shake things up and raise profits.
Sony’s filings with the U.S. Securities and Exchange Commission stated that the company will only pay $600 Million USD for Bertelsmann AG’s stake and release $600 Million USD of cash holdings (Bertelsmann already had $300 Million USD of those holdings) which equates to about $900 Million USD. Tax benefits and other consolidations should make the deal worth closer to about $1.5 Billion USD for Bertelsmann AG.
The consolidation of the company will enable Sony to have full control over ownership and distribution of recording labels such as Arista Records, Columbia Records, Epic Records, J Records, Jive Records, RCA Victor Records, RCA Records, Legacy Recordings, Sonic Wave America, and others. Bertelsmann AG will retain the rights “over selected European music catalog assets from Sony BMG, which represents about $20 million, or less than 1 percent of Sony BMG’s revenue last year.”
Bertelsmann AG’s CEO Hartmut Ostrowski noted, “This move is consistent with our new growth strategy and will enable us to focus on our defined growth areas,” he said. “Sony has been an excellent partner, and they are the right company to take this business to the next step and ensure that it realizes its full value and potential.”
