BMG, the Bertelsmann/Kohlberg Kravis & Roberts joint venture, got back onboard for the auction to buy the Warner Music Group, as first reported by CNBC, by bidding on the entire company this time around, sources say. Earlier in the first round a bid for the Warner/Chappell Music publishing company by BMG fell short, sources said at the time.
If BMG wins the auction and buys the entire WMG company, sources say that it will sell off the pieces it doesn't want, the frontline record label operations and retain the publishing division, Warner/Chappell, and possibly certain deep catalog masters. In fact, sources further suggest that BMG is counting on the sale of the frontline record operation to either Sony Music Entertainment or Universal Music Group, or a combination of the two, to fund its bid for WMG. While some suggest that the BMG bid may have even come packaged as a bid from all three -- BMG, Sony and Universal -- other sources familiar with the situation dismissed that notion.
For one, Sony Music Entertainment and Sony/ATV itself has a bid in already, although sources are divided on whether that is for the entire WMG company or just for Warner/Chappell. Either way, why would Sony bid against itself in conjunction with a BMG offer, some sources ask, dismissing the notion it's working with BMG. But another source says that there were earlier discussion between Sony and BMG to make a joint bid, but it never got past the talking stage.
Meanwhile, Vivendi chairman Jean-Bernard Levy told the Telegraph on March 13 that his company declined to bid in the first round of the Warner Music auction. "We do not have in mind any significant acquisition," he added. "From time-to-time there will be a catalogue opportunities."
If WMG were sold piecemeal, Universal would be interested in being involved, people familiar with UMG thinking say. But others note that the WMG auction was conducted so that suitors could bid on the whole company, or either of the two pieces, the record label division or the publishing division. So since Universal has thus far not bid, the only way it could get involved now is if the auction breaks down -- or if someone like BMG is successful in buying the entire company, and then offers to sell Universal the pieces it doesn't want.