Warner sings Bertelsmann unit’s tune

Conglom recently rejected EMI's $4.2 bil takeover offer

Warner Music reportedly is eyeing Bertelsmann’s BMG Music Publishing unit.

Bertelsmann is selling the division to partially repay a credit line of E4.5 billion ($5.7 billion) the company is using to buy back a 25% share held by Groupe Bruxelles Lambert (GBL).

Warner Music, which recently rejected a $4.2 billion takeover offer from British record company EMI, is a surprise suitor for Bertelsmann’s music publishing division, U.K. newspaper the Business reported, citing sources.

An aggressive move by Warner CEO Edgar Bronfman to bulk up his Warner Chappell music publishing arm would provide an attractive exit should EMI make a strong offer for the bulk of the Warner business.

EMI would have to sell Warner Chappell for competition reasons because it has a big publishing arm. Bronfman could retain and run a newly enlarged Warner Chappell.

Bertelsmann is set to repay a significant part of the loan over the next 12 to 18 months from its regular cash flows as well as from the expected proceeds from a sale of BMG Music Publishing.

Valued at some $1.9 billion, BMG Music Publishing accounts for 17.5% of the BMG division’s total annual revenue of $2.7 billion.

Meanwhile, Bertelsmann has commissioned four international banks to finance its $5.7 billion loan.

The German media giant said Monday it had tapped Barclays Capital, BNP Paribas, Deutsche Bank and the Royal Bank of Scotland as lead arrangers, underwriters and bookrunners to arrange the $5.7 billion loan.

Bertelsmann’s main shareholders, the Mohn family, the Bertelsmann Foundation, GBL and the company’s executive board agreed to the deal last week.

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