PolyGram buys the Motown legend for dollars 300m: Dutch company gets 30,000 album recordings dating back to the Sixties

POLYGRAM, the Dutch record company, is to pay dollars 301m ( pounds 205m) to acquire Motown, the legendary black music label that includes Diana Ross and Stevie Wonder on its list of artists. PolyGram, 79 per cent owned by Philips, will issue up to 10 million shares to help to fund the takeover, reducing Philips' stake to 75 per cent.

PolyGram is acquiring a catalogue of 30,000 master album recordings dating back to the 1960s. These include tracks such as Marvin Gaye's 'I heard it through the grapevine', the Supremes' 'Stop in the name of love', and Stevie Wonder's 'You are the sunshine of my life'. The deal also includes Motown's current line-up of artists as well as television, film and video production interests, merchandising and the Motown trade mark.

US analysts admitted the price paid for Motown seemed high, but said it was not out of line with the valuation PolyGram put on Island and A&M records, which have both turned out to be significant contributors to the company's bottom line. Motown was also the last independent label of any size still available, they said.

An unusually high portion of Motown's value is in its catalogue, and PolyGram will share the right to exploit the old songs with Motown's founder, Berry Gordy, a one-time boxer and car factory worker, who retained publishing rights when he sold the label to Boston Ventures and MCA in 1988 for dollars 61m.

Mr Gordy's Jobete Music, which is thought to be worth considerably more than Motown, will get the lion's share of revenues from the use of Motown's 60s hits in advertising and other media. But PolyGram will have the right to re-issue the original songs and repackage them for new multi- media audiences.

PolyGram values the Motown name at more than dollars 50m, but says it will not place a value on the catalogue - the accounting 'goodwill' involved in yesterday's deal - until the end of the year.

Last year Motown had sales of dollars 134m and was in profit, although PolyGram declines to say by how much. The assets being acquired, before valuation of the music catalogue and minus liabilities, amount to a deficit of dollars 24m, in effect increasing the purchase price to dollars 325m.

PolyGram said yesterday its own first-half net income rose by 19 per cent to 204m guilders ( pounds 72m) on sales of 3.167bn guilders, a 6 per cent increase on 1992 interim sales of 2.984bn guilders.

More recent acts on Motown's roster of 30 current artists include Boyz II Men, Johnny Gill, Shanice and Another Bad Creation. PolyGram also acquires the Mojazz label.

PolyGram has been Motown's sole distributor in the United States and a licensee in the rest of the world. Jheryl Busby, Motown's president and chief executive officer since 1988 said that the new parent understood the company's legacy and its need to expand for the next century. Mr Busby will continue in his current role and will be responsible to the board, chaired by Clarence Avant, who owns Avant Garde Music Publishing and already has links with PolyGram.

PolyGram's share issue raised speculation that it is looking for further acquisitions as it already has liquid assets of almost 500m guilders. The group is also thought to be interested in film and distribution opportunities.

View from City Road, page 24

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