Warner Music Group may have a new owner in the form of Len Blavatnik's Access Industries, but broadly speaking, insiders feel we can expect more of the same from the company. That's because his close relationship with WMG chairman and CEO Edgar Bronfman Jr. is expected to result in management stability at the company, despite new ownership.
Blavatnik has been involved with the Warner Music Group for four years, through his ownership of 2% of company stock and his role as a member of the WMG board of directors from 2004 until January 2008. That board met yesterday to review the bids.
On the other hand, if the Platinum Equity/Gores Group bid had emerged as the winner, there likely would have been a management shake-up at WMG. The two firms jointly bought Alliance Entertainment last September and its CEO, Alan Tuchman, resigned last month.
The two companies are headed, respectively, by brothers Tom and Alec Gores, and both firms are actively involved in the operations of acquired companies, according to executives familiar with the firms. Also, if the Gores brothers had managed to prevail in the WMG auction, their brother Sam Gores, chairman of leading talent agency Paradigm, also was expected to figure into the mix somehow.
Some found it surprising that Blavatnik emerged as the winner of the auction because many industry pundits initially suspected that his bid was meant to serve as the "stalking horse" -- the suitor that legitimizes an auction by setting the floor price so that other bidders can't low-ball the purchase price. Once other suitors were flushed into the open, many expected Blavatnik's bid to fall by the wayside.
Blavatnik, a self-made businessman who emigrated from Russia, is one of the richest men in America, according to Forbes. Until now, his investments have focused in the oil, chemical, real estate, mobile, and television industries.
And in purchasing WMG, he is making the same bet that the other private equity owners made when they bought the major back in 2004: that digital salvation will occur, returning the industry to growth and even more profitability.
Even though that hasn't happened yet, the private equity consortium's investment in WMG hasn't been too shabby, with their initial investments cashed out and an incremental 22% return, even before the pending sale of the company.
Many believe that Blavatnik is now in line to bid on EMI, when that company is put up for sale later this year by Citigroup. The thinking goes that a merger of two major record companies would yield about $300 million in overhead savings. That means that a potential WMG strategic buyer could afford to bid than private equity firms in an auction for EMI. But that also means that such a buyer would carry a more onorous regulatory risk, which Citigroup may not want to bet on.
What do you think Access Industries' purchase will mean for WMG - and EMI? Sound off in the comments below …