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Ex-Seagram chief buys Warner Music

New York, Nov. 24 (Reuters): Time Warner Inc. on Monday said it would sell its Warner Music business to a group led by media mogul Edgar Bronfman Jr. for $2.6 billion, in a move to trim the media group’s debts and signalling a return of the former Seagram chairman to the music business.

The Bronfman group beat out a bid by EMI for the recorded music portion of the business for an estimated $ 1 billion.

By choosing the Bronfman bid, Time Warner is forsaking $250 million to $300 million in cost savings it could have realised by combining with EMI, home to such acts as The Beatles and Radiohead. Warner Music artists include Madonna, Led Zeppelin and R.E.M.

On the other hand, Time Warner is getting more cash up front by selling the entire business, which includes the music publishing company, and will have an easier path to regulatory approval.

In the past, European and US regulators have frowned on consolidation within the music business.

Bronfman's team, backed by some of America’s biggest private equity houses, including Thomas H. Lee Partners, is betting it can slash costs and turn Warner Music around ahead of a comeback in sales, a major challenge in an industry currently on the decline.

Bronfman has had long ties to the music business, first as a songwriter for the likes of Dionne Warwick and Celine Dion, and later as head of Seagram when he bought entertainment group MCA from Japan’s Matsushita for $5.7 billion. On his watch, the renamed Universal Music bought Polygram, creating the world’s largest record company.

Bronfman merged his family’s entertainment empire with France’s Vivendi three years ago, only to see the family fortune disintegrate. When Vivendi put its entertainment assets on the block earlier this year, Bronfman led a group to buy the assets back but was ultimately outbid by NBC.

Hit by rampant piracy and competition from other entertainment such as video games, music sales are expected to fall for the fourth year in a row in 2004.

Earlier this month Sony Music agreed to merge with Bertelsmann AG’s BMG.

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