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AOL Time Warner to hive off CD business

New York, March 7: AOL Time Warner is in talks about selling the CD and DVD manufacturing business of its Warner Music division as part of continuing efforts to pay down its roughly $ 29 billion in debt, executives briefed on the talks said on Thursday.

One executive said the company hoped to make as much as $ 1 billion from the sale. The manufacturing business, which also produces DVDs for AOL Time Warnerís film division, has been the fastest-growing part of Warner Musicís income as the music industry has slid into a downturn. The company has not disclosed the amount of its manufacturing revenue, leading to some uncertainty about the strength of its core music sales. Some analysts say that manufacturing could make up as much as $100 million of Warner Music's roughly $ 480 million in operating profit last year.

Executives briefed on the talks said the company had decided on the sale because manufacturing is a low-margin business that is ancillary to the core media and entertainment business. Selling the manufacturing business could raise enough money to reduce pressure to sell the rest of the music division. But removing the faster-growing manufacturing business from Warner Music is likely to make the rest of the division appear less valuable.

A likely bidder for the manufacturing business is Cinram International of Toronto, the largest company specialising in making CDs and DVDs. Cinram has said it is seeking to expand through acquisitions, and it signed an agreement last month with Warner Music to distribute its CDs in Canada. Cinram makes some CDs for Warner Music as well. A spokesman could not be reached for comment. Another possible bidder is Matsushita Media Manufacturing, a partnership between Matsushita of Japan and Eastman Kodak.

In a speech at a Bear, Stearns investors conference this week, Richard D. Parsons, chairman of AOL Time Warner, said the company hoped to raise as much as $ 4 billion this year from selling businesses to pay down its debts.

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