Orchard going public with Digital deal

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DENVER -- Digital Music Group Inc. and The Orchard have agreed to combine in a reverse merger, creating a mix of content ownership and distribution across video and music assets.

Digital Music shares rose 12.3% to $4.48.

The combined business will retain Digital Music's Nasdaq listing and change its name to the Orchard, the firms said in a statement. Orchard CEO Greg Scholl will lead the combined company.

A reverse merger is a way for a privately held company to go public.

The Orchard is a digital-distribution firm that helps independent artists and labels get placement on digital music services like Apple Inc.'s iTunes. It also serves as a marketing agent for clients looking to license their music in various outlets.

The roster of artists it distributes includes Coldplay, Death Cab for Cutie, Donna Summer, Ella Fitzgerald, Bob Marley, Dave Brubeck, James Brown, Tony Bennett and Frank Sinatra (pictured).

Digital Music does the same, but owns a much larger collection of assets, particularly in the video space. While the Orchard owns a few small jazz and world music labels, the merger partner's catalog of master recordings and video clips -- from classic TV shows to stand-up comedy performances -- is far greater and was a driving factor for the deal, sources said.

Additionally, the merger allows privately owned the Orchard to take advantage of Digital Music's status as a publicly traded company to raise funds on the stock market. The Orchard is owned by venture-capital firm Dimensional Associates, which also owns eMusic.

Under the terms of the reverse merger, Digital Music will issue about 9.1 million common shares and about 4.5 million shares of convertible preferred stock to Orchard's shareholders.

Digital Music CEO Mitchell Koulouris will leave the company. The firm's current CFO, Karen Davis, will serve as interim CEO until the merger is completed, which is expected in the fourth quarter.

Antony Bruno is a contributor to Billboard. The Hollywood Reporter's Georg Szalai in New York contributed to this report.
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