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UPDATE: Sony almost doubles music catalog with EMI deal

Sony Corp. will take control of EMI Music Publishing as it looks to profit from the surge in popularity of digital streaming services.

The Japanese consumer electronics company said subsidiary Sony Corp. of America would acquire Mubadala Investment Co.'s 60.2% equity interest in DH Publishing LP, which owns and manages EMI Music Publishing, for $1.9 billion.

The deal almost doubles the size of Sony's music catalog. EMI Music Publishing brings the rights to publish 2.1 million musical compositions to the 2.3 million copyrights already held by Sony, which include titles by The Beatles and contemporary stars such as Justin Timberlake.

EMI Music Publishing's library includes titles by artists such as Kanye West, Drake and Sia. It generated revenue of $663 million, adjusted operating income of $181 million and adjusted EBITDA of $249 million in the fiscal year ended March 31.

"The music business has enjoyed a resurgence over the past couple of years, driven largely by the rise of paid subscription-based streaming services," Sony CEO Kenichiro Yoshida said.

"In the entertainment space, we are focusing on building a strong [intellectual property] portfolio, and I believe this acquisition will be a particularly significant milestone for our long-term growth."

Sony's music division is one of its fastest-growing units. In the year ended March 31, it reported sales and operating revenue in the music division rising 23.5% year over year to ¥800 billion from ¥647.7 billion, while operating income jumped 68.6% to ¥127.8 billion from ¥75.8 billion.

Sony also owns a stake in Spotify Technology SA, the music-streaming service that was listed on the New York Stock Exchange on April 3.

Exposure to growth

EMI Music Publishing will provide the company with more exposure to a growth area at a time when other parts of its empire are experiencing slowdowns. Sony estimated sales for the year ending March 31, 2019, would shrink 2.9% year over year to ¥8.30 trillion due to unfavorable foreign-exchange rates and lower sales in mobile communications.

It reported sales of ¥8.54 trillion in the fiscal year ended March 31.

EMI Music Publishing was acquired in 2012 from a subsidiary of Citigroup Inc. by a consortium led by Mubadala and including Sony and the Michael Jackson Estate. Since 2012, EMI Music Publishing has been run by Mubadala's private equity business.

Under the terms of the deal announced May 22, Sony Corp. of America will acquire Mubadala's 60.2% equity interest in DH Publishing. Nile Acquisition LLC, which is 74.9% controlled by Sony, currently holds 39.8% of EMI Music.

Following the transaction, Sony will indirectly own approximately 90% of the music publishing firm. The remainder will be controlled by the Michael Jackson Estate.

EMI Music Publishing has an enterprise value of $4.75 billion, the companies said. Sony expects to pay a total cash consideration of $2.3 billion to consolidate EMI Music, and will assume its debt of about $1.36 billion.

The announcement confirms a March 12 report about a potential deal between the Japanese company and the Abu Dhabi sovereign fund.

As of May 21, US$1 was equivalent to ¥111.14.