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Jackson Assets Draw the Gaze of Wall Street

Andrew Ross Sorkin and Michael J. de la Merced|The New York Times
Monday, 20 Jul 2009 | 12:25 PM ET

As the world sorts through the pieces of Michael Jackson’s life one month after his death, so, too, does Wall Street.

Michael Jackson
AP
Michael Jackson

A handful of major financial firms have made inquiries into buying the Jackson estate’s 50 percent share of Sony/ATV Music Publishing , the company that controls most of the Beatles song catalog, according to people briefed on the matter. Among them are Colony Capital, Kohlberg Kravis Roberts, Plainfield Asset Management and the media mogul Haim Saban, these people said.

Sony/ATV is by far the most valuable asset in Mr. Jackson’s estate, and his 50 percent stake could be worth as much a $500 million. Mr. Jackson bought the majority of the Beatles catalog in 1985 for $47.5 million, after an informal chat with Paul McCartney about the wisdom of buying song catalogs.

Since then, Sony/ATV — formed from a 1995 partnership with Sony — has bought up the rights to thousands of songs from artists, including Bob Dylan, Joni Mitchell, Beck and Taylor Swift. In recent years, it made a big push into TV production, helping to balance out its radio business.

“Sony/ATV’s really started to gain greater value in recent years,” said Barry Massarsky, a music industry consultant who has done work for Sony/ATV and its rivals. “I’m very bullish on its prospects.”

John G. Branca, the entertainment lawyer who structured Mr. Jackson’s initial purchase of the Beatles catalog and is now one of two executors of his estate, declined to comment by e-mail on Sunday, saying only that the Jackson stake in Sony/ATV “is not for sale.”

Mr. Branca and John McClain, a music executive, will make decisions about the estate, pending confirmation at an Aug. 3 court hearing in Los Angeles.

Still, that has not stopped financiers from approaching Jackson family members and Sony, people briefed on the discussions said. Some of these firms already have a connection to the Jackson family.

Colony, for instance, is a co-owner of the Neverland ranch, Mr. Jackson’s former home. The firm’s chairman and chief executive, Thomas J. Barrack Jr., has contacted representatives of the family, these people said. Plainfield, which lent money to Mijac, an entity that owns Mr. Jackson’s own songs as well as those from the likes of Sly and the Family Stone, has also contacted the family, these people said. (Mijac has an estimated worth of $50 million to $100 million and is likely to grow with the pickup in album sales since his death.)

Mr. Jackson nearly lost his stake in Sony/ATV — and his family’s fortune — in 2006. He was days away from filing for bankruptcy when Howard Stringer, the chief executive of Sony, dispatched his chief financial officer, Robert Wiesenthal, to Dubai to broker a last-minute lifeline for Mr. Jackson. Mr. Jackson was living in the emirate at the time and quickly spending cash.

“His finances were in complete shambles,” said Duross O’Bryan, a forensic accountant at the consulting firm AlixPartners who served as an expert witness at Mr. Jackson’s 2005 child molestation trial. “There were serious issues with regards to his ability to meet debt when it comes due.”

The deal, negotiated in Mr. Jackson’s suite at the Burj Al Arab hotel, saved the singer from bankruptcy. In return, Sony took greater operational control of Sony/ATV and received an option to buy half of Mr. Jackson’s share.

Despite earning hundreds of millions of dollars over his lifetime, Mr. Jackson was well known for having a mountain of debt, born of expensive indulgences like the sprawling Neverland estate, costly music and tour productions and art and antiques buying sprees. The estate still carries $400 million to $500 million in debt. Barclays holds about $300 million of debt against the Jackson estate’s stake in Sony/ATV.

It remains possible that Sony could seek to use its option, leaving the Jackson family with a 25 percent stake in the business. Some of the private equity firms have proposed teaming with Sony to buy the remaining stake from the family, these people said.

A spokeswoman for Sony said the company was not interested in selling its stake. Representatives for Colony, K.K.R. and Mr. Saban declined to comment. A representative for Plainfield could not be reached for comment.

Speculation about the Jackson stake in Sony/ATV swirled at the Allen & Company retreat for media moguls in Sun Valley this month. Several attendees said Mr. Stringer had fielded inquiries into the possibility over dinner. Mr. Saban made an informal inquiry then, these people said.

The stake is likely to continue to grow in value, and some members of the Jackson family have pondered the merits of selling. Still others have proposed eventually cobbling together a consortium to buy out Sony’s share in the publisher.

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