Warner Music Prepares For IPO

Ending months of speculation, Warner Music Group filed with regulators for an initial public offering of common stock that could be worth up to $750 million for the company.

Since Edgar Bronfman Jr. became CEO of Warner Music about a year ago, paying $2.6 billion for the privilege, he and his team have cut 20 percent of the workforce from the Warner Bros. division, quadrupled the remaining employees’ health insurance premiums, closed offices and have become conservative in signing new talent. As the Los Angeles Times pointed out, the IPO now makes clear what was behind the curtain.

“The view of the people taking the company public is that this is an industry two-thirds of the way through its transition, and on the other end it’s a growth industry again,” T. Rowe Price Group media analyst Henry Ellenbogen told the paper. “The results of the IPO will be a statement by U.S. investors on the future of the music industry.”

Last year, U.S. unit sales in the recording industry grew about 1 percent from 2003, and worldwide retail sales reached $32 billion, according to Warner Music. When it filed with the Securities and Exchange Commission for the IPO, Warner Music stated it was poised to save $250 million a year, surpassing its original goal by $50 million. Among this good fortune, Bronfman and his investors have seen their $2.6 billion purchase price returned to their bank accounts.

Although the recording company boasts 38,000 artists, including Madonna, Linkin Park, Green Day and Kid Rock on its various labels, it is still the smallest of the Big Four majors, falling behind Sony BMG, Universal Music Group, and EMI. The Wall Street Journal believes the IPO is the first step to romancing EMI into a merger.

Although Warner Music did not disclose how many shares it will offer in the IPO, it plans to have the offering value the company at $4 billion, sources told the WSJ.