BMG Rights Buys Chrysalis

Chrysalis chief Chris Wright has agreed to sell his music group to BMG Rights Management for nearly £108 million.

The offer price of 160 pence per share is a 46 percent premium on the closing price Oct. 29, when Chrysalis revealed it was in acquisition talks.

German-based BMG Rights Management, a joint venture between the giant Bertelsmann media group and U.S. private equity firm KKR, reportedly beat other interested parties because it could put the cash on the table.

During the bid process, Chrysalis said it had received several offers – Bug Music and Imagem Music being the most rumoured– but 73.4 percent of the London company’s shareholders opted to go for the BMG Rights deal.

Analysts are divided over whether it’s a better deal than the 155 pence per share offer from EMI that Chrysalis rejected in April 2008. That offer was made in a buoyant financial market but, by the time protracted negotiations were under way, it had slumped.

The whole thing fell apart when it became apparent that Terra Firma, which less than a year earlier had bought EMI with financing from U.S. banker Citigroup, was having trouble repaying it. It’s questionable if EMI could have found the money it offered.

Wright, who stands to make £30 million when the deal goes through, will become the non-executive UK chairman of BMG and join its supervisory board.

Both sides are staying quiet on whether the deal will result in job losses at either company. In London, Chrysalis has a larger office than BMG but there’s no word on whether it plans to keep both open.

Chrysalis was founded – originally as a band agency – by Wright and Terry Ellis in 1969. Ellis sold his shares to Wright in 1985.
In 2007, Wright sold the radio division, including Heart and Galaxy, to Global Radio for £170 million.

A year later, EMI’s 155 pence offer for the remaining Chrysalis music publishing business came as no surprise, as it had bought the recorded music business side in 1991.

The rest of the Chrysalis stock is held by institutional investors including Schroders, North Atlantic Value and Guinness Peat.