Vivendi's Universal Music is vaulting to the top spot in music publishing after agreeing to buy BMG Music Publishing for €1.63 billion ($2.1 billion).

Vivendi's Universal Music is vaulting to the top spot in music publishing after agreeing to buy BMG Music Publishing for €1.63 billion ($2.1 billion).

German media conglomerate Bertelsmann AG, BMG Music Publishing's parent company, also said on Wednesday (Sept. 6) it would pay Vivendi $60 million to settle litigation related to financing it once provided to file-sharing service Napster.

Vivendi, the French media and telecoms group, topped offers from six other bidders for BMG Music Publishing, which owns the rights to thousands of songs, including works by Coldplay, Christina Aguilera and Barry Manilow.

It had been seen as a frontrunner in the auction since it was tipped Bertelsmann would sell BMG earlier this year. Other bidders included Warner Music Group and a team that included media conglomerate Viacom Inc. and private equity firm Apollo, sources familiar with the situation said.

Publishers have been increasingly coveted by investors because they are partly shielded by many of the piracy issues that have rattled the music industry. In addition to generating revenue when CDs or downloads are sold, music publishers make money by licensing songs to be performed live and for use in films and television shows.

"The acquisition of BMG Music Publishing is a unique opportunity to grow our music publishing business and enhance the value of Universal Music Group at a time when the music market is improving, supported by technological innovations and digital sales," Vivendi Chief Executive Jean-Bernard Levy said.

Vivendi's shares were down 0.2% to €27.10 ($34) at 1024 GMT. The company was advised by Merrill Lynch on the deal.

Bertelsmann, which is selling its music publishing arm to help fund the €4.5 billion ($5.7 billion) buyback of a minority stake in the company, said the agreement would increase its net income by about €1 billion ($1.27 billion).

BMG, the world's third-largest music publishing company, had 2005 revenue of €371 million ($474 million), accounting for about 2% of Bertelsmann's total.

The deal price represents about a 9.6 multiple on BMG's net publishers share (NPS) of €170 million ($217 million). NPS, which measures the amount of royalties retained by a publisher, is the sector's most closely watched cashflow figure.

The BMG deal has been approved by the boards of both companies and is likely to be reviewed by competition authorities in both the United States and Europe.

Bertelsmann, which was advised by Citigroup and J.P. Morgan, said it expected to be paid by the end of the year. It had said in July that it would not bear any anti-trust risk from the sale, but declined to comment on the subject on Wednesday.