As expected, Sony Corp. [SNE] and Bertelsmann AG have ended their joint music business venture prematurely. Sony has agreed to buy out Bertelsmann's 50% stake in major label Sony BMG Music Entertainment, creating Sony Music Entertainment Inc., a wholly owned subsidiary of Sony Corp. The deal, still subject to regulatory approval, is worth a total of $1.2 billion, including $300 million in cash from the joint venture's balance sheet and $900 million for Bertelsmann's 50% stake, according to a regulatory filing.
Sony BMG will redeem a portion of Bertelsmann's stake in the joint venture for $600 million in cash, the filing said. Next, Sony Corp. of America will pay $600 million for the remaining stake.
Created in August 2004, the joint venture was due to expire a year from now, but was effectively terminated early with the buyout. Bertelsmann said in a separate statement that BMG will focus on music rights management, including "the planned establishment of a licensing and management platform for exploiting and marketing music rights under the BMG brand." BMG will take over a small portion of Sony BMG's music catalog in Europe, worth about $20 million annually and accounting for less than 1% of Sony BMG's total revenues.
In midmorning trading, Sony Corp. shares were up about 3% to $38.11. Their value has fallen 27% since a June 5 peak, and reached a 52-week low of $36.90 on Monday. - Paul Bonanos
See Aug. 5 press release from Sony
See June 13 post from Tech Confidential on Sony and BMG splitting up their joint venture
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