Death Row Records wants to sell its music-related assets, including the rights to recordings from rappers Tupac Shakur, Dr. Dre and Snoop Dogg, for $25 million to Warner Music Group Corp., subject to higher bids at an auction.
The court-appointed administrators running the bankruptcy estates of Death Row Records and owner Marion “Suge” Knight have asked the U.S. Bankruptcy Court in Los Angeles to approve the bidding procedures and leading bid at a Feb. 26 hearing.
The offer from Warner to purchase all music-related assets that belong to Death Row and Knight “will result in the highest or best collective recovery for the estates,” said R. Todd Neilson, the Chapter 11 trustee of Death Row Records’ estate, in court documents filed Friday.
Neilson said he has spent more than a year analyzing the record company’s financial information to determine whether it would be best to pursue a plan of reorganization or a sale of the company’s assets. He said significant “gaps” in the company’s financial and business records that remain have led him to decide in favor of a sale.
Besides the rights to music recordings, the assets for sale include videos, master copies of recordings, merchandising rights and inventory.
Neilson said he and Richard K. Diamond, who is administering Knight’s bankruptcy estate, would determine how to distribute the sale proceeds between the two estates, subject to the bankruptcy court’s approval.
Neilson proposed that potential bidders submit their offers by April 11 for an April 24 auction. He asked that the court give final approval to the sale at a May 12 hearing.
Competing bidders must initially exceed Warner’s offer by at least $1 million, and subsequent bids must increase by increments of at least $100,000, Neilson requested. He wants to pay Warner a break-up fee of $500,000 plus reimbursement of up to $250,000 in expenses if its bid doesn’t win at auction.
Neilson said he began meeting with potential buyers last spring, and that 18 parties have entered into confidentiality agreements to access company records and research a transaction, including companies with prior relationships to the record company or Knight, strategic buyers, major record labels and other entities in the music industry.
Death Row Records received bids from “several parties” last summer, according to Neilson, but Warner’s bid was determined to be “the bid most likely to enable the estates to recover fair consideration for the acquired assets.”
Warner owns such record labels as Atlantic, Bad Boy, Elektra, Rhino and Warner Bros. According to the company’s annual report, its earnings for the year ended Sept. 30 were $3.385 billion.
After producing a string of hit rap records in the 1990s, Death Row Records struggled after Knight spent two stints in prison for assault, weapons and parole violations.