Vivendi agrees to buy BMG Music for $2.09b

BERLIN -- Vivendi agreed to pay $2.09 billion to acquire the BMG Music Publishing Group from media company Bertelsmann yesterday in a deal that will give the French company the world's largest music publishing catalog and songs by artists such as Coldplay and Robbie Williams.

Vivendi SA beat out a group of other bidders that reportedly included Warner Music Group Corp., Viacom Inc., and EMI Group PLC. Its Universal division was thought to have the nod from the beginning, because of its smaller music publishing arm it was likely to face fewer regulatory constraints than EMI or Warner.

Universal Music Group is already the world's biggest recorded music company, and the BMG unit is expected to be absorbed by the Universal publishing group.

BMG Music Publishing owns the rights to more than 1 million songs by artists such as Nelly, Maroon 5, Christina Aguilera, Justin Timberlake, and Mariah Carey, as well as classics by the Beach Boys, Barry Manilow, and others.

Universal chairman and chief executive Doug Morris said the deal would diversify the company's portfolio into ``key areas" such as classical and Christian music.

``The acquisition of BMG Music Publishing is a unique opportunity to grow our music publishing business and enhance the value of Universal Music Group at a time when the music market is improving, supported by technological innovations and digital sales," Vivendi's chief executive, Jean Bernard Levy, said.

Some analysts said Vivendi paid too much and questioned its strategic rationale. Under the former leadership of Jean-Marie Messier, Vivendi embarked on a huge expansion that transformed it from a water utility to a global media conglomerate. But the company was left with a mountain of debt and was forced to sell some assets.

Standard & Poor's said, however, that it was holding its credit ratings for Vivendi unchanged and noted that music publishing ``is a profitable and fairly stable business."

And Fitch saw the acquisition as ``credit positive" for Vivendi ``by contributing a strong asset at a price that does not significantly increase its leverage."

Bertelsmann AG, which also reported an 8.5 percent increase in first-half net profits yesterday, said the transaction has been approved by the supervisory boards of both companies. It expects to receive the funds before the end of 2006. Vivendi said the deal had been approved by its management as well.

The deal must be approved by US and EU regulators, and analysts warned that they are likely to scrutinize it particularly closely because of the new entity's size.