Bids due June 9 for Tower.
Two of the largest accounts in the music business may soon have new owners. Sources say that publicly traded Source Interlink, the parent of Alliance Entertainment Corp. (AEC), is being shopped by Deutsche Bank Securities, in a bid to take the company private. Meanwhile, the future ownership of Tower Records, which has been on the block since February, could be decided soon, as bids are due June 9, according to sources.
In March, Bonita Springs, Fla.-based Source Interlink hired the investment bank to explore strategic alternatives to enhance shareholder value, “including but not limited to, a recapitalization, strategic acquisitions, and the combination, sale or merger with another entity. Of those possibilities, sources say the company so far has implemented the latter: a “book” with the company's financials has been sent to private equity firms in the past few weeks. It appears that potential strategic suitors have been excluded from the distribution of the Source Interlink book.
Yesterday, the company reported net income of $3.3 million, or six cents per diluted share, on sales of $454.6 million in its fiscal first quarter, ended April. 30. During a conference call with Wall Street analysts, the company said that its Alliance Entertainement operation—the largest one-stop in the U.S. music business—had strong sales growth in the period.
Meanwhile, sources say second round bidding on Tower, which is being shopped by the Houlihan Lokey investment bank, appears to have generated at least five offers for the West Sacramento, Calif.-based chain. The bidding was initially due June 2, but was extended to June 9 to accomodate some other late bids. Its believed that all bids are from private equity firms.
Source say one of them is HM Capital, formerly known as Hicks, Muse, Tate & Furst, the firm that is believed to placed the highest bid the last time Tower Records was being shopped, in the summer of 2004. At that time, the Tower board of directors decided not to accept any of the offers.
Source Interlink, Tower Records, and HM Capital, all decline to comment.