Bronfman, Buying Warner Music, Names U.S. Chief

When Warner Music Group executives sit down at Manhattan’s Citarella restaurant tonight with the investors who will soon own the company, they’ll probably be joined by someone who only recently made the guest list: their new boss.

Lyor Cohen, chief of Universal Music’s Island Def Jam label, has been hired to take the reins of Warner Music’s U.S. recorded-music business, in the first major move by Edgar Bronfman Jr., head of the team buying the company. Bronfman made the Cohen announcement Sunday, the day before several Warner Music executives were to discuss their labels’ operations with the Bronfman-led group, which includes private equity firms Thomas H. Lee Partners, Bain Capital and Providence Equity Partners.

Cohen’s decision to bolt Universal Music, which is owned by Vivendi Universal, has inflamed speculation about the ranks at his new and former employers. At Warner Music, his appointment as chairman and chief executive of the U.S. unit could spark an executive shuffle forcing several top veterans out the door.

It would be just the latest shock for Warner Music, which spent much of last year in a dizzying dance with suitors before Time Warner Inc. decided to sell the unit to the Bronfman team for $2.6 billion in cash.

The purchase of the company is expected to be finalized within 10 days, and sources close to the team say the new owners are expected to cut about $250 million in costs, resulting in hundreds of layoffs.

It’s unclear whether Roger Ames, chairman of Warner Music under Time Warner, will have a role in the company. One person close to the situation said it appeared that Cohen would report to Bronfman. A spokeswoman for Bronfman said the chain of command hadn’t been established.

An exit by Ames would be a twist: As head of former music giant PolyGram, Ames helped strike a deal to buy a stake in what was then called Def Jam. More recently, Ames had himself tried to recruit Cohen to Warner Music before Time Warner put the company on the block.

Ames sounded an upbeat note on Sunday, saying, “I’m excited about this. I think it’ll be a great thing to work with Lyor again.”

For Cohen, 44, the new job will cap a tumultuous year during which he was found liable in a fraud lawsuit against Island Def Jam and ordered to pay millions in damages, dealt with the fallout of a federal money-laundering investigation into a Def Jam affiliate label, saw his label lose money amid duds from Ja Rule and others and, most recently, earned a small fortune selling Phat Farm, the rap apparel line he owned with longtime partner Russell Simmons, for roughly $130 million.

Cohen said the decision to leave Island Def Jam “didn’t come easy. But this opportunity doesn’t come often.”

Universal had sought to keep Cohen, offering him what sources said was a sizable five-year deal to stay. Universal said in a statement Sunday, “We thank Lyor for his many valuable contributions over the last several years and wish him only the very best in his new endeavor.”

Neither Bronfman nor Cohen would say what the executive would earn at Warner Music, but Cohen’s compensation is expected to include a percentage of any increase in the value of the company.

“This was not a bidding war, where Lyor simply went to the highest bidder,” Bronfman said. “The truth is, Warner Music Group made its own offer, which is based on his sharing in our ultimate success. My belief is, if you can put together some of the best executive talent into a group and find ways to mentor and motivate them, you’re going to be very successful.”

Until recently, Bronfman was, essentially, one of Cohen’s bosses at Universal, the world’s largest record conglomerate. Bronfman gave up his vice chairmanship of the Vivendi board shortly after he decided to go after Warner Music.

The 48-year-old Bronfman was head of his family’s Seagram Co. when it purchased the former MCA Inc., then a music business also-ran. It was revitalized with the hiring of former Time Warner music chief Doug Morris and, later, when MCA picked up Warner’s stake in hot Interscope Records.

Then Seagram absorbed PolyGram, buying the piece of Def Jam it didn’t own for more than $100 million. With PolyGram, MCA changed its name to Universal, which was purchased by Vivendi in 2000.

Once installed at Warner Music, Cohen could seek to hire away his top two deputies at Island Def Jam, Kevin Liles and Julie Greenwald. Cohen acknowledged that both have contracts that are up for renewal but said their futures were “entirely up to them.” One wildcard: former Arista Records head Antonio “L.A.” Reid, who since being fired two weeks ago has held discussions with Universal and Warner Music about potential employment.

Simmons, who first made Cohen a partner in Def Jam, said Sunday that Cohen -- who helped dream up strategies to turn Def Jam’s underground acts into stars in the 1980s -- probably would mean a big shake-up for Warner.

“A lot of people who think the old way are going to probably be out,” Simmons said. “I promise you he’s going to make a success out of that place. He’s their savior.”