Sony Corp. appears to be moving forward with plans to sell off its half of Sony/ATV Music Publishing, after recently triggering a clause in its contract with its co-owner, the Michael Jackson estate, that allows one party to buy out the other, according to people familiar with the matter.
The world's biggest music-publishing company, Sony/ATV is co-owned by Sony and the estate of the late pop star, who died in 2009. Mr. Jackson and Sony had jointly owned the company since 1995, with each partner holding a 50% stake.
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Sony/ATV's catalog includes the copyrights to most of The Beatles' songs, as well as songs by stars ranging from Marvin Gaye and the Rolling Stones to pop's Taylor Swift and dance music's Calvin Harris. Unlike record labels, which own and distribute sound recordings, music publishers own rights to lyrics and melodies and license them out for various uses—including recordings released by record labels.'
People in the music industry estimate Sony/ATV's value around $2 billion. Sony hasn't put a price tag on its share yet, these people said, adding that the process is not a public auction pending the outcome of direct negotiations between Sony and the Jackson estate.
Lenders were notified when Sony triggered the exit clause last month, they added.
Sony/ATV's structure grants both partners the right to counter any offer to buy out the other side, as well as to bid for the half each doesn't own.
The potential sale of its stake of Sony/ATV could help Sony raise cash following a multiyear restructuring aimed at shrinking the Japanese company's dependence on its beleaguered consumer-electronics businesses such as televisions and mobile phones. Sony's net profit more than tripled during the quarter ended June 30 to ¥ 82.44 billion ($685 million), thanks to strong sales of videogames and smartphone image sensors. While the music-publishing business is profitable, generating ¥ 66.9 billion ($556 million) in revenue for Sony last year and a projected ¥ 70.1 billion ($590 million) this year, according to Sony's filings, it doesn't mesh with Sony's other businesses and operates separately even from Sony's record label, Sony Music Entertainment.
Sony appears to have been considering the sale of its Sony/ATV stake for a nearly a year if not longer. The potential sale was mentioned in emails among top Sony executives in November of 2014—emails that were among the thousands of documents stolen by hackers and posted online. In one email exchange following a planning meeting last year, Sony Corp. of America Chief Financial Officer Steve Kober wrote to Sony Entertainment Chief Executive Michael Lynton that they were trying to keep the potential sale "top secret."
Mr. Jackson, the late pop star, bought ATV Music Publishing for $47.5 million in 1985, and sold Sony a 50% stake for more than $100 million in 1995.
In 2012, Sony and Mr. Jackson's estate joined other investors, including Abu Dhabi's Mubadala Development Co. and music mogul David Geffen, to acquire EMI Music Publishing for $2.2 billion, and Sony/ATV Music now generates revenue administering the EMI catalog for the investor group. It isn't clear whether Sony would package its share of EMI in the sale.
(By Hannah Karp)