GE Reportedly Puts RCA/Ariola on Block

Speculation on Wall Street and within the recording industry grew Friday that General Electric has put its recently acquired record operations, RCA/Ariola International, up for sale. Knowledgeable sources put the asking price at about $400 million.

Officials of RCA/Ariola referred questions about the rumors to General Electric, which would neither confirm nor deny an impending sale.

“It is our company policy not to comment on rumors of acquisitions, disposition, joint ventures and the like,” GE spokesman Bruce Bunch said.

With sales of more than $600 million annually, RCA/Ariola is the the third-largest U.S. record distributor, behind CBS Records Group and Warner Communications. Its artist roster includes Kenny Rogers, Diana Ross and rock groups the Eurythmics and Mr. Mister.

The company was formed a year ago by the merger of RCA Records and Bertelsmann AG, a West German communications conglomerate.

In addition to its own label, RCA/Ariola manufactures and distributes records for A&M; Records (the Police, Janet Jackson) and Arista Records (Whitney Houston, Aretha Franklin).

Despite its impressive list of artists, RCA/Ariola has not fared well recently. According to one knowledgeable source, the company lost $6 million on its North American operations last year and earned a net profit of only $23 million overall on reported sales of $757.8 million. The latter figure includes the results of RCA’s successful joint ventures with Columbia pictures to distribute home video software, which are believed not to be for sale.

Sale to Reduce Debt

General Electric acquired RCA/Ariola when it purchased RCA Corp. this year for $6.28 billion--the largest non-oil acquisition in U.S. history. From the beginning, there has been speculation that GE would sell off the record operation to help reduce the debt it took on as part of the purchase.

“I’m sure GE would like to unload it,” said one Wall Street analyst who asked not to be identified. “The record business is big volume and low profit margins; it’s too cyclical, faddish, and it doesn’t fit the image of GE.”

“They definitely want out of it,” said one record company president who requested anonymity. “It will be sold at some price very quickly.”

Among those most often mentioned as potential buyers are Coca-Cola, entertainment giant MCA, Walt Disney Co., former 20th Century Fox owner Marvin Davis, Arista Records President Clive Davis in partnership with former 20th Century Fox Chairman Alan Hirshfield, and current RCA/Ariola President Elliott Goldman. All declined comment or could not be reached Friday.

“Everyone on that list would make sense; they would be logical lookers,” said Harold Vogel, an entertainment industry analyst for Merrill Lynch in New York.

MCA, parent of the Universal Studios complex, was reported to be in discussions to acquire all of RCA last year.

“Disney made a pass at Capitol-EMI and Polygram last year--they’d like to play in the music business,” one industry source said. Arista’s Clive Davis has long wanted his own record company, sources say, and his Arista contract is up in December. Goldman was named president of RCA/Ariola last December and has since presided over a major restructuring at the company.