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“KKR’s deals are usually four to five years and then they’re out; it’s not what they do.”
——industry source

BERTIE, KKR NOT ON THE SAME PAGE IN EMI SWEEPSTAKES?

Germans Looking to Get In Deeper, While KKR’s Goal Is to Take the Money and Run, as BMG Denies Rift
Echoing revelations made by our own I.B. Bad last month, N.Y. Post media reporter Claire Atkinson writes this morning that KKR and Bertelsmann have a fundamental disconnect in the goals of their three-year-old joint music venture, the Hartwig Masuch-led BMG Rights Management. KKR has a 51% stake in the JV, while Bertie holds 49%.

BMG, she points out, is considered a lead contender for EMI assets headed for the auction block next month. The most attractive asset is Parlophone, which is valued at $600 million and is the home of Coldplay, as well as the valuable catalogs of David Bowie and other big names.

While both KKR and Bertelsmann support BMG entering the EMI auction, which is scheduled to kick off in mid-November, they have different ideas when it comes to price, sources tell Atkinson.

Because buyout king KKR has been more cautious than Bertelsmann, the outcome of the auction could determine the fate of their joint venture as well. If BMG wins the EMI auction, it stands to double its revenue and become a significant player in the recorded-music business. If it fails, KKR could head for the exit. Indeed, according to Atkinson’s sources, KKR is already weighing its alternatives.

A BMG Chrysalis spokesman denies the two companies have disparate goals:  “The N.Y. Post’s unnamed sources are either completely misinformed or they are deliberately disseminating misinformation. There are no immediate plans for a KKR exit from BMG, nor is there any link between a KKR exit and the outcome of any EMI-related process.”

BMG’s main rival in Universal’s upcoming EMI auction is Warner, points out Atkinson, while the rights management company is also hoping to scoop up publishing businesses Virgin and Famous. Sony/ATV is divesting those businesses after acquiring EMI Music Publishing. One scenario being floated is for Bertelsmann to buy out KKR’s stake; KKR could also sell out to a separate entity.

“KKR’s deals are usually four to five years and then they’re out; it’s not what they do,” one senior music source told Atkinson. Another exec familiar with BMG’s thinking added, “They won’t exit immediately. They will start looking for an exit within 12 months.” The two partners may pair up on other acquisitions outside of BMG, said a source familiar with both companies. “There may be continued relations on other projects.”

See this morning’s Rumor Mill for the latest on this still-unfolding situation.   

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