Bug Music Inc., a closely held music publisher, is pursuing a sale of the company and drawing interest from private-equity firms and strategic buyers, said two people with knowledge of the matter.
The Los Angeles-based company is seeking $330 million to $400 million in a sale, said the people, who weren’t authorized to talk publicly. First-round bids are due next week and JPMorgan Chase & Co. (JPM) is running the auction, they said.
Bug Music, acquired in 2006 by an investor group led by private-equity firm Spectrum Equity Investors, completed 35 acquisitions in the past five years, buying songs and music catalogs that generate licensing fees, the people said. Online services from Spotify Ltd. and Amazon.com Inc. that let users access songs on multiples devices are boosting revenue and investor interest in music companies, they said.
Tasha Pelio, a spokeswoman for New York-based JPMorgan, declined to comment.
Sony/ATV Music Publishing LLC, a joint venture of Sony Corp. and the estate of Michael Jackson, is among 30 companies, including advertising agencies, that signed a nondisclosure agreement to receive an offering book, said two people. Jimmy Asci, a spokesman for Sony/ATV in New York, declined to comment.
Before the 2006 buyout, Bug Music collected royalties on behalf of artists and didn’t own the rights to songs. The investors have transformed the business from one that focused on copyright administration into one that now owns 425,000 copyrights itself. Revenue from that business accounts for 85 percent of total sales.
Kings of Leon
Bug Music, whose roster includes Kings of Leon and Bruno Mars, last month acquired Countdown Media, a supplier of cover music with a catalogue of 80,000 recordings. With Countdown, Bug Music accounts for as many as 7 million annual track sales on Apple Inc.’s iTunes, one of the people said.
Bug Music leased 20,000-square-feet at 6100 Wilshire Blvd. in Los Angeles, including 3,200-square-feet of recording studios and a 17th-floor space where performances can be shown live online, the company said June 23 in an e-mailed statement.
The company also has rights to tracks including “What a Wonderful World,” “Fever” and “Happy Together,” as well as songs by Johnny Cash and Stevie Ray Vaughn.
Spectrum, founded in 1994 by Brion Applegate and William Collatos, raised six funds representing $4.6 billion of private- equity capital, according to the company’s website.
The Spectrum fund that owns a stake in Bug Music is reaching the end of its investment period and, as a result, must start divesting holdings, according to two people with knowledge of the matter. Other assets in the fund include Ancestry.com Inc. (ACOM) and SurveyMonkey.com LLC, said one of the people. Over the past year, Spectrum has generated $1.5 billion in proceeds by selling portfolio companies outright or their selling shares, the person said.
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