BMG Acquires Chrysalis


BMG Rights Management has agreed a deal to acquire Chrysalis for £107.4 million ($168.6 million).
It follows three weeks of talks between BMG and Chrysalis, one of the world's biggest independent publishers. The company has a 100,000-strong catalog in its publishing division which includes interests in songs by David Bowie and Michael Jackson along with artists Cee Lo Green, Sheryl Crow and Blondie.
Chrysalis chairman and founder Chris Wright said it marks "the end of one era and the start of another" for the company which began in 1968. When Chrysalis disclosed a month ago it was up for sale again, BMG was always the front-runner to make a deal.
The offer price of 160 pence ($2.51) per Chrysalis share represents a 46% premium on the closing share price on Oct. 29 (when Chrysalis disclosed it was in talks).
It represents a good deal for Chrysalis and is more than the £104 million ($163 million) offer from EMI that was rejected in April 2008. BMG Rights Management is a joint venture between German media giant Bertelsmann and private equity firm KKR. 
BMG Rights Management has made a string of acquisitions this year including Stage 3, Cherry Lane and the Adage IV catalog. The question of market share is not simple to determine on a global basis for music publishing, but understands the company believes it is currently No. 5 and intends to make further acquisitions that would put it in fourth place.
If that's correct, BMG Rights Management may well be the biggest independent ahead of Kobalt. Looking at the publishers' share of U.S. radio airplay monitored by Nielsen BDS in Q2 2010, BMG came in sixth -- its debut in the Publishers Airplay top 10 chart -- with a 7.7% share and Chrysalis was eighth with 3.2%. Their combined share of 10.9% would have put them at No. 4 in that quarter ahead of Universal Music Publishing Group on 10%. However, the position was not so strong for BMG and Chrysalis in Q3 when Universal Music Publishing Group had a much better performance; BMG made No. 6 with 5.2% and Chrysalis did not make the top 10 (Billboard, Nov. 20).
The deal has been made through the investment vehicle Forte Bidco 1, which is a wholly owned subsidiary of BMG Luxco, a joint venture between Bertelsmann and KKR. BMG has already secured agreement to acquire 73.4% of the issued share capital of Chrysalis at 160 pence. The shares in Bidco or Chrysalis will ultimately be transferred to BMG.
Hartwig Masuch, CEO of BMG, said in a statement: "We believe that our offer represents compelling value for Chrysalis' shareholders as evidenced by the strong endorsement BMG has received from Chrysalis' Board and its major shareholders. The acquisition of Chrysalis represents an important step forward in our strategy as we build a major, global music rights business. Chrysalis' extensive and high quality catalogue represents an excellent fit with our existing business." 
He added: "Our strategy is to provide state-of-the-art, comprehensive and transparent management of music rights and the operational excellence of Chrysalis reinforces this commitment. BMG looks forward to working with Chrysalis to build on its success to date for the benefit of all stakeholders."
Chris Wright added: "Today's deal marks the end of one era and the start of another for Chrysalis, a company which has been at the heart of the music industry since I founded it jointly with my original partner, Terry Ellis, more than four decades ago. Our continued progress -- evolving from management, recorded music, television and radio to focus on music publishing -- has been clearly recognized by BMG. As we embark together on the next chapter of the Chrysalis story, I am proud of both our track record and our future prospects in an industry in which we have both innovated and pioneered."
BMG said it will continue to use the Chrysalis name for at least three years. Its main markets are the U.K., U.S. and Scandinavia. 
Chris Wright has been invited to join the supervisory board of BMG and to become non-executive U.K. Chairman of BMG.