Access Industries' winning bid for Warner Music Group will pay $8.25 per share in an all-cash deal, according to a joint press release issued Friday morning. The deal is for both Warner's recorded music and publishing divisions.
Shares of Warner rose to $8.04 in early Friday trading. They reached a 52-week high of $8.15 on Thursday before closing at $7.63.
According to a press release, Warner's board of directors approved the transaction and recommended that Warner's stockholders approve the transaction. The transaction is also subject to customary closing conditions and regulatory approvals. The companies expect the transaction will be completed in the third calendar quarter of this year.
A bid of $8.25 per share implies an enterprise value of roughly $3 billion (or roughly $3.3 billion if Warner's cash and cash equivalents are included, although the acquisition of cash effectively lowers the acquisition price). That figure includes a market value of roughly $1.28 billion, cash and cash equivalents of $263 million and long-term debt of $1.94 billion. The latter two figures are from the company's balance sheet for the period ending December 31, 2010.
Warner shares were trading around $5.80 in late March when Warner was attracting a multitude of bidders. Among the bidders to make the final cut were Access, a joint bid from Platinum Equity/The Gores Group and bids for Warner's separate divisions from Sony Music and Ron Perelman and Guggenheim Partners, Reuters reported.
The company's shares are up 40.32% year to date. The last time its shares were this high was September 2008. They reached $8.16 on September 24 before falling to $3.62 in one month later and reaching a low of $1.58 on March 3, 2009. At the time, investor sentiment was low after Warner had pulled its videos from YouTube in December 2008.
Access has secured committed financing from Credit Suisse and UBS Investment Bank. These funds, in addition to equity financing from Access, will finance the cash consideration to WMG's stockholders. The announcement on the deal did not provide a breakout of the financing, but earlier news reports suggest that the deal will be funded with $2 billion in debt and the remainder equity.
WMG's Chairman and CEO, Edgar Bronfman, Jr., said, "We believe this transaction is an exceptional value-maximizing opportunity that serves the best interests of stockholders as well as the best interests of music fans, our recording artists and songwriters, and the wonderful people of this company. We are delighted that Access will be the new steward of this outstanding business. They are supportive of the company's vision, growth strategy and artists, while bringing a fresh entrepreneurial perspective and expertise in technology and media. Most importantly, Access supports Warner Music's commitment to our recording artists and songwriters who are the foundation of our current and future success."
Len Blavatnik, Chairman and founder of Access Industries, said, "I am excited to extend my longstanding involvement with Warner Music. It is a great company with a strong heritage and home to many exceptional artists. I look forward to working closely with the many talented people within the company."
Access Industries is a privately held, U.S.-based industrial group with long-term holdings worldwide. Access was founded in 1986 by its Chairman, Len Blavatnik. Access' industrial focus spans three key sectors: natural resources and chemicals; telecommunications and media; and real estate.
In winning the auction, Access outbid at least 10 other suitors, including billionaires like Ron Burkle and his Yucaipa Companies and MacAndrews & Forbes' Ron Perelman.
Following the closing of the transaction, WMG will become a privately held company and its stock will no longer be traded on the New York Stock Exchange. The company will retain the Warner Music Group name and will continue to operate out of its current facilities.
Thomas H. Lee Partners L.P. and its affiliates, Bain Capital Partners, LLC and its affiliates, and Edgar Bronfman, Jr., who together hold approximately 56% of the company's outstanding shares, have entered into a voting agreement with Access under which those stockholders have agreed to vote their shares in favor of the merger.
Goldman, Sachs & Co. and AGM Partners LLC acted as financial advisors to WMG, and Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as the company's legal advisors. Credit Suisse and UBS Investment Bank acted as financial advisors to Access, and Debevoise & Plimpton LLP acted as Access' legal advisors.