Continuing its mega-merger mania, Time Warner Inc. and EMI Group PLC today announced an agreement to combine their music businesses into a joint venture called Warner EMI Music. The planned merger, which would create the industry's largest music company, comes two weeks after Time Warner famously agreed to merge with Internet service provider America Online Inc.
The new joint company will be equally owned by Time Warner and London-based EMI Group and will marry the recorded music and music publishing businesses of the two companies, Time Warner and EMI said in a joint statement.
Under the terms of the agreement, EMI at completion of the deal will transfer to Warner EMI Music its net debt, valued at 930 million pounds (US$1.5 billion) as of Sept. 30, 1999, while Time Warner will transfer a comparable level of debt adjusted for interim activity. Time Warner will also finance a cash payment of 1 pound for each EMI share, in a cash transaction valued at some $1.3 billion, Time Warner and EMI said.
In addition, Time Warner will receive rights to eight percent of the enlarged EMI ordinary share capital if EMI's share price reaches 9 pounds within the first three-and-a-half years after completion of the deal.
Warner EMI Music, alongside AOL Time Warner Inc., will have the expertise and content to exploit the potential of digital media and realize the opportunities presented by the Internet and other new media, the companies said.
Concerned about loss of revenue over copyright issues, large recording companies have been reticent about moving online to offer music for download, either for free or for a fee. Only recently have the five (now four with the Warner-EMI deal) major music companies recognized that they have to increase their online presence.
Warner Music Group currently runs the music site CDNow, where users can buy CDs online and get music industry news.
Roger Ames, chairman and chief executive officer of Warner Music Group, a division of Time Warner that will be part of the new company, will be the CEO of Warner EMI Music, while Ken Berry, CEO of EMI Recorded Music, will be chief operating officer of the new company, the companies said.
Time Warner President Richard Parsons and Eric Nicoli, chairman of the EMI Group, will serve as co-chairmen of the Warner EMI Music board of 11 directors, which will be controlled by Time Warner with six seats.
Warner EMI Music will be headquartered in New York. Its international operations will be based in London, the companies said.
Earlier this month, AOL and Time Warner announced a planned merger to create a company with over $30 billion] in annual revenue. [See "UPDATE2: AOL to Merge with Time Warner for US$350B," Jan. 10.]Time Warner, in New York, can be reached at +1-212-484-8000, or at http://www.timewarner.com/. EMI Group, in London, is at http://www.emigroup.com/.