Ending months of on-again, off-again negotiations and widespread Wall Street speculation, CBS Inc. announced late Wednesday afternoon that it has reached an agreement to sell its record division to Sony Corp.
"The Sony board in Tokyo and CBS board in New York approved the sale of the record division for $2 billion in cash. It was unanimous," said CBS President and Chief Executive Laurence A. Tisch as he left CBS' New York headquarters Wednesday evening following a special board meeting called to vote on the sale.
In a statement released minutes after the board meeting ended, CBS said that while it has signed a "definitive agreement to sell our worldwide record operations," the company doesn't expect the deal to be finalized until early 1988, "after receipt of required government approval."
"After long discussion and very careful review, our board concluded that this is a very attractive offer in terms of value to the shareholders, while it also provides an important source of capital and allows us to focus all of our energies and resources on our core business of broadcasting," Tisch said in the CBS statement.
CBS Chairman William S. Paley--who reportedly had previously resisted the idea of selling the record division--was quoted in the CBS statement as saying the deal was "clearly in the best interest of the corporation and its shareholders."
Before the announcement, CBS stock closed at $176 a share on the New York Stock Exchange on Wednesday, up $8.625 from Tuesday's close. Sony also rose, gaining $2.75 a share to $35.625.
CBS Records Group spokesman Bob Altshuler said Wednesday that the name of the company will be changed to CBS Records Inc., that it will continue to operate from CBS' headquarters in New York and that "senior management will remain in place."
For its $2 billion, Sony Corp. gets the world's largest and most successful record company. With about 6,000 employees worldwide, CBS Records deploys the most powerful--and the most widely emulated--armada of manufacturing, distribution, marketing and artist acquisition operations in the industry.
The company's three labels--Columbia, Portrait and Epic--boast an artist roster that is the envy of competitors, both for its size and the wealth of talent. Bruce Springsteen, Michael Jackson, Billy Joel, Bob Dylan, Barbra Streisand, Willie Nelson and Placido Domingo are just a few of the more than 200 performers under contract.
Last year, CBS Records reported operating profits of $162.1 million--an all-time record industry high--on revenue of $1.49 billion, accounting for 37% of CBS' total operating profit and 31% of its revenue. This year, the company is expected to report profits of about $200 million.
Paul Richter reported from New York and William K. Knoedelseder Jr. reported from Los Angeles.