Bertelsmann And KKR At Loggerheads

Bertelsmann and U.S. private equity firm KKR are at loggerheads over their joint venture music company, according to the New York Post.

The problem seems to concern the company’s future direction with Bertelsmann wanting to take a punt at buying Parlophone, one of the EMI assets that Universal must shed to keep the European regulators happy, while KKR is said to be nervous about the likely cost of such an acquisition.

The label, which has Coldplay, Kylie Minogue, Blur, and Tinie Tempah, is valued at about $600 million and a few UK business analysts reckon that Warner Music Group could be interested at that price.

Other reports suggest that the joint venture and Warner may also be competing to scoop up publishing businesses Virgin and Famous, which Sony/ATV may be keen to shed after EMI Music Publishing.

The outcome of the auction could depend on Bertelsmann and KKR bidding with a united purpose, but at the moment it seems just as likely that the two companies could sever their partnership.

If their joint venture were to make a successful bid, the company stands to double its revenue and become a significant player in the recorded-music business. However, if the bid fails, KKR could head for the exit by selling its 51 percent slice of the company, probably to its partner.

“The N.Y Post’s unnamed sources are either completely misinformed or they are deliberately disseminating misinformation. There are no immediate plans for a KKR exit from BMG, nor is there any link between a KKR exit and the outcome of any EMI-related process,” said a BMG spokesman.

The Post’s reasoning is based on the premise that KKR’s deals usually last four to five years before the investment house eyes up the chance of exiting with a profit.

“They won’t exit immediately. They will start looking for an exit within 12 months,” an unnamed source told the Post.