Virgin Music Sells Stake to Japanese Firm : Deal Reflects Growing Consolidation of the Recording Industry

The rapid consolidation of the recording industry took another step forward Monday as Virgin Music Group, one of the last independent companies in the business, agreed to sell a minority stake to a Japanese media firm.

Fujisankei Communications Group will pay about $150 million to purchase a 25% interest in Virgin Music, which said it will use the funds for international expansion. The transaction, which the companies tentatively agreed to last summer, is the largest Japanese investment ever in a European media company, Virgin Music officials said.

The deal, however, is dwarfed by last week’s news that Sony Corp. of Japan has agreed to buy Columbia Pictures Entertainment for $3.4 billion.

Fujisankei, a Tokyo-based media conglomerate with music and publishing interests, said it hopes to use the Virgin deal as a springboard to launch a new record label in Japan to promote sales of top British pop stars in Asia.

“Virgin Music, with its worldwide network of growing record and music publishing companies and versatile repertoire ranging from rock to classical, is the ideal investment partner” for Fujisankei, Hiroaki Shikanai, chief executive of Fujisankei, said in a prepared statement. “Together, we hope to cooperate in developing our music activities, especially in the emerging new markets of Southeast Asia.”

Virgin Music is the world’s sixth-largest record company, with revenue of $400 million in 1988, according to the company. Its stable of well-known musicians includes Phil Collins, Peter Gabriel, Keith Richards, Simple Minds, Human League, UB40 and Boy George.

“We could not have hoped for a better partner than Fuji,” said Richard Branson, the flamboyant British entrepreneur who heads Virgin Music.

Branson added that his company “consciously chose a partnership that would not only ensure our future independence under existing management but would provide a springboard for our ambitions to become the world’s No. 1 music group.”

Branson’s ambitions these days are shared by more and more record companies seeking to keep their tape, record and compact disc factories supplied with a steady stream of hits.

In the past three years, at least six other prominent record companies have been completely or partially acquired by industry giants vying to expand.

The West German publishing conglomerate Bertelsmann AG paid about $300 million in 1986 for the 75% of RCA Records that it did not already own. In its first move into the entertainment business, Sony bought CBS Records for $2 billion in 1988.

MCA Records and the investor group Boston Ventures bought Motown Records for $61 million. This year Thorn-EMI PLC bought 50% of rival Chrysalis Records and N. V. Philips’ Polygram purchased reggae and rock producer Island Records for about $300 million.

Next week, Polygram is expected to announce the completion of its purchase of A&M; Records for an estimated $500 million.

Branson took Virgin Music private last year after complaining that he was unhappy with the stock market’s valuation of his company’s shares.