Warner Music Said to Hire Goldman Sachs to Explore Buyout; Shares Jump

Warner Music Group Corp. hired Goldman Sachs Group Inc. to solicit takeover bids, according to a person with knowledge of the company’s plans, sending the shares up as much as 27 percent.

Warner Music was approached by Kohlberg Kravis Roberts several weeks ago, said the person, who sought anonymity because discussions are private. Chairman and Chief Executive Officer Edgar Bronfman Jr. took the offer to the board, which decided to hire Goldman, the person said. An offering document is likely to be circulated in coming weeks, the person said.

Warner Music climbed $1.24 to $5.96 at 11:59 a.m. in New York Stock Exchange composite trading after earlier rising as much as $1.28. The New York Times last night reported Goldman’s hiring to explore interest from KKR and other suitors. The shares fell less than 1 percent in 2010.

The New York-based label, whose artists include Kid Rock, is working on a possible offer to purchase EMI Group Ltd., the person said. Talks with New York-based KKR on a possible joint bid for London-based EMI several months ago ended and aren’t likely to restart, the person said.

Warner Music’s board is also exploring whether to sell the company in pieces because the value of its publishing division, Warner/Chappell Music, isn’t reflected in the stock price, the person said.

Photographer: Xabier Mikel Laburu/Bloomberg

Warner Music Group Chief Executive Officer Edgar Bronfman Jr. Close

Warner Music Group Chief Executive Officer Edgar Bronfman Jr.

Close
Open
Photographer: Xabier Mikel Laburu/Bloomberg

Warner Music Group Chief Executive Officer Edgar Bronfman Jr.

Amanda Collins, a spokeswoman for Warner Music, declined to comment.

Bronfman’s Stock

Bronfman, 54, stands to gain at least $5.8 million if bidding drives Warner’s stock above $7, based on a Jan. 18 company decision to lower the vesting price on previous grants of restricted stock.

Under the plan, Bronfman will get 825,000 shares if the stock reaches $7, escalating up to 2.75 million shares if the closing price averages $10 for 60 trading days, according to a company filing this week. That may give Bronfman a payout of as much as $27.5 million.

Sixty percent of Bronfman’s restricted stock will vest by March 14, according to the filing. A sale of the company may accelerate that process, according to filings. The company also lowered the vesting prices for Vice Chairman Lyor Cohen.

Bronfman and Jean-Marie Messier were found guilty by a Paris court of criminal charges related to Vivendi SA’s near- bankruptcy after a $77 billion acquisition spree while they led the company.

Vivendi Decision

Messier was fined 150,000 euros ($200,000) and Bronfman 5 million euros by a panel of three judges at a hearing today. Messier, 54, was charged with misleading investors during his tenure as Vivendi’s chief executive officer. Bronfman was charged with trading on inside information while vice chairman.

Photographer: Suzanne Plunkett/Bloomberg

Madonna CD's from Warner Music Group at a shop in London. Close

Madonna CD's from Warner Music Group at a shop in London.

Close
Open
Photographer: Suzanne Plunkett/Bloomberg

Madonna CD's from Warner Music Group at a shop in London.

“Mr. Bronfman has informed the company that he intends to appeal today’s trial court decision to the Paris Court of Appeal,” Warner Music said today in a statement, adding that under French law, the fine is suspended pending the final outcome of the case.

“The Board of Directors is disappointed with the decision in this matter, and fully supports Mr. Bronfman as he appeals this verdict," Scott M. Sperling, chairman of the company’s Executive Governance & Nominating Committee, said in the statement.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.