Sony Buys Out Bertelsmann

Japanese electronics giant Sony Corporation has acquired German media corporation Bertelsmann’s 50 percent stake in Sony BMG.

Details were not disclosed at press time. U.K. business analysts have said Bertelsmann chairman and chief exec Hartmut Ostrowski wanted $2.99 billion, but more conservative estimates suggest he settled for $1.99 billion or $1.5 billion.

The new company will be called Sony Music Entertainment and become a wholly owned subsidiary of Sony Corporation of America.

Sony and Bertelsmann originally created the Sony-BMG joint venture in August 2004, although the independent music companies are still challenging the linkup in the European courts.

Sony chairman and chief exec Howard Stringer said the company undertook a very successful restructuring during its four years as Sony-BMG and will continue to be a leader in the creation and distribution of music worldwide.

"It is an organization rich in talent, ideas and enthusiasm, and is a strong fit with our overall business strategy," he said in a statement. "Music has been a vital and vibrant part of Sony’s culture for over 20 years. This acquisition will allow us to achieve a deeper and more robust integration between the wide-ranging global assets of the music company and Sony’s products, operating companies and affiliates."

Ostrowski, who wants to raise funds for future Bertelsmann acquisitions, said the company took "a careful and thorough review" before making the decision to sell its investment in the joint venture.

"This move is consistent with our new growth strategy and will enable us to focus on our defined growth areas. Sony has been an excellent partner, and they are the right company to take this business to the next step and ensure that it realizes its full value and potential," he said.

Once the transaction is complete, Sony Music Entertainment will include premier music labels such as Arista Records, Columbia Records, Epic Records, J Records, Jive Records, RCA Records and Zomba.

Key recording artists will include Celine Dion, Alicia Keys, Yo-Yo Ma, Bruce Springsteen, Justin Timberlake and Usher.

As part of the transaction, the parties have agreed to continue to share the company’s manufacturing and distribution requirements between Sony’s manufacturing subsidiary – Sony DADC – and Bertelsmann’s services company – Arvato Digital Services – by extending the agreements with Arvato for additional terms of up to six years.

In addition, Bertelsmann will take over selected European music catalog assets from Sony BMG.

Consummation of the transaction remains subject to a number of conditions, including approvals of regulatory authorities in certain jurisdictions.