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All American music sale

Pearson puts group on market

NEW YORK — British media group Pearson put the music division of All American Communications on the market Wednesday, two months after completing its $515 million acquisition of All American.

Pearson said it had retained Lazard Freres to “coordinate the disposal” of the music company, a very small part of All American’s predominantly TV production and distribution business.

Wall Streeters speculate the company, which has a small catalog and volatile earnings history, will likely fetch somewhere between $20 million and $40 million.

Pearson said the music group “has a diverse roster of artists under contract, including Weird Al Yankovic, James Brown and Craig Mack.” The company has more than 150 albums in its catalog.

Pearson said it had sales of about $19 million last year, which is down 25% from the sales of $25.5 million reported by All American for 1996.

Pearson did not report earnings for the division, but All American’s public filings show the division had an extremely volatile earnings history, fluctuating from a loss of $450,000 in 1994 to an operating profit of $13,000 in 1995 and an operating profit of $2.05 million in 1996.

Bankers said this type of earnings history was typical of hit-driven independent music companies. One said these companies usually were valued at about two times annual sales, which puts a price tag on the company of no more than about $40 million.

Other Wall Streeters said the price could be much lower, between $10 million and $20 million, depending on its recent earnings history and the value of its contracts.

All American said in its 1996 annual report that the value of the music division’s assets was just $3.8 million at Dec. 31, 1996, down from $10.7 million a year earlier.

Pearson said the planned sale was in line with its strategy “to focus on developing the core television production and distribution assets acquired in the All American transaction.”

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