Sony may sell its half of Sony/ATV

According to a Bloomberg report on the recent leak of hacked Sony emails, Sony Corp. is considering selling its share of Sony/ATV Music Publishing.

Sony/ATV is a 50/50 spilt venture between Sony Corporation and theMichael Jackson estate. The details of the potential sale were being handled by Sony Entertainment CEOMichal Lynton, along with Sony Corp. of America President Nicole Seligmanand Sony’s US Chief Financial Officer Steve Kober.

The emails dated November 21 from Kober highlighted that ‘the company had concluded the business had a few growth prospects’.

Sony/ATV and EMI’s publishing assets include historical gems such as the former’s Beatlescatalogue and the latter’s Motown catalogue.

On its own, Sony/ATV sees revenues of about $510 million and another $115 for administrating EMI's catalogue. EMI’s revenue on its own generates about $725 million.

Prior to the joint merging of the two conglomerates, Jackson bought ATV a decade earlier from Australian businessman Robert Holmes a Court, outbidding Beatles singer Paul McCartney.

In 2012, along with other investors involved in EMI’s divestment, Sony paid $2.2 billion for EMI Music Publishing. The other investors included Blackstone Group’s GSO Capital Partners LP, Geffen and Mubadala Development Co., which is owned by the Abu Dhabi government and proved to be a concern in later years. During the merger this combination represented the world’s biggest music publishing business, with Sony estimating a global market share of more than 30 percent.

In an email dated Oct 3 2015, Sony CFOKenichro Yoshidamade reference to the unstable conditions of the market and the company’s set up stating that the business “has a rather complex capital and governance structure and is impacted by the market shift to streaming." The emails released in the Bloomberg report also noted that further details of the sale plan, including possible partners, are unknown. It is still undetermined by the leaked emails whether Sony was looking to sell all of its publishing assets, or its portion of the EMI Music Publishing catalogue.

Bidding and silent deals for potential acquisitions have in the past been rejected by the EU and other regulatory bodies due to conflicts of interest and other in-house conundrums. Originally, the EU let Sony/ATV buy EMI because it was part of a consortium that enabled transparency of the company’s accounts and enforced proper business judgment of all parties. The EU also forced Sony/ATV to sell off about $100 million in publishing assets at the time in order to allow the merger.

The structure of the acquisition, which commenced in 2012, sees the staff combined into one team to representboth Sony/ATV and EMI catalogues. Given this set up, it would seem unlikely that a private equity firm would acquire the EMI catalogue without also purchasing Sony/ATV and its staff. In order for the sellers to obtain an optimum price, it would need a huge amount of prospective partners to join forces in a bid resulting in a sale of most publishing assets.

In an estimation reported by Billboard, a sale of both catalogues would bring in about $3 billion-$3.5 billion.