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Warner Music to buy Roadrunner

From Bloomberg News

Warner Music Group Corp., home to artists including Madonna and James Blunt, agreed to buy a majority stake in heavy-metal label Roadrunner Music Group for $73.5 million.

Roadrunner will be a free-standing label within the Atlantic Records Group, New York-based Warner Music said Monday. The company is getting a 73.5% interest in Amsterdam-based Roadrunner, founded by Cees Wessels in 1980. Wessels will run the unit and remain based in the Netherlands.

The deal brings to Warner the Canadian band Nickelback, whose “All the Right Reasons” was a top-selling album in the U.S. in 2005 and this year. Roadrunner, also home to Slipknot and Megadeth, has increased its market share in the heavy metal and hard-rock genres by more than 2 percentage points in the last year to 8.7%, Warner said.

“It’s a good fit,” Bishop Cheen, a bond analyst with Wachovia Securities in Charlotte, N.C., said in an interview. “They’re buying rock ‘n’ roll. You don’t have to explain who Roadrunner are.”

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Atlantic Records has on its roster hard-rock bands such as Metallica and Staind.

Warner Chief Executive Edgar Bronfman said this month that he expected to use the company’s cash to make acquisitions. The last independent label Warner acquired was Ryko Corp. in March for $67.5 million.

The deal ends a distribution arrangement Roadrunner had with Vivendi’s Universal Music Group, the world’s largest record company.

Lyor Cohen, who signed Roadrunner to the distribution accord when he headed Universal’s Island Def Jam label group, now runs Warner’s U.S. recorded music division.

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“Edgar hooked up with Lyor for exactly this kind of deal,” Cheen said.

Record companies including Warner are using sales of downloaded music -- including songs, mobile-phone ring tones and videos -- as a means to make up for declines in revenue from physical media such as compact discs.

Warner’s digital sales almost doubled to $104 million in the quarter ended Sept. 30. Revenue from recorded music including CDs fell 5.7% to $731 million.


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