From Russia With Love

Posted by | Feb. 1, 2011 | 10,297 views

Oil, coal, plastics and aluminum are good investments, especially if you’re a Russian oligarch. And that’s exactly what Leonid “Len” Blavatnik is and where he made his fortune. Blavatnik’s US-based Access Industries earned him billions (he’s on the Forbes Billionaires List with a reported net worth of $7.5 billion) with these investments after the fall of the Soviet Union.

After attending Columbia University and Harvard Business School, Len became an American citizen. Besides his vast business holdings, he is also an active philanthropist through his Blavatnik Family Foundation.

Access Industries diversified its holdings and moved into media and entertainment. Blavatnik put in a bid for MGM last year but was rejected. He then bought the UK arm of Mel Gibson’s Icon Productions and last October sealed a deal with The Weinstein Co to fund movies with budgets of $5 million to $10 million. Access Industries’ other media holdings include majority stakes in Perform Group (the online sports broadcaster), TopUpTV (a UK-based digital terrestrial TV service provider), and Amedia (an entertainment TV content developer and producer in Russia) together with minority stakes in RGE Group (an Israeli TV production company)… and Warner Music Group.

According to Fred Goodman in his book Fortune’s Fool, Blavatnik invested $25 million with pal Jr. Bronfman in return for a seat on the WMG board. He remained on the board until January 2008, but during his tenure, Goodman writes, “a joint venture among Blavatnik’s Access Industries, WMG, Sony-BMG Music and two Russian record labels was launched to exploit digital rights in Russia. The company reportedly achieved annual mobile sales of $120 million before being sold in 2009.”

In 2007 Blavatnik bought his third Manhattan property, a luxurious townhouse, for $50 million from his good bro Jr. Bronfman. Junior made more than 11 times what he paid for it 12 years earlier. Len really likes Junior, I guess.

Corporate governance experts question the ethics of such a transaction. A personal transaction like this between a CEO and a board member could easily give the appearance of a conflict of interest, especially when the director has business before the company. But Junior scoffed at the idea, telling Goodman “To me there’s zero conflict and we’ve had zero inquiries. You can get sued for anything—and you do.”

So what’s all this have to do with anything now? Well, a lot, maybe.

Reporters have begun digging into the sale/purchase of EMI and, as of late, Warner Music. It seems like dozens of scenarios have been explored with various combinations of buyers and sellers being floated.

As the story goes, Thomas Lee Partners, owners of 35% of WMG stock, has wanted out for a long time now. They’re said to be forcing the issue with Junior. But Junior doesn’t want to let go or give up on the music business. Why is anyone’s guess. One observer suggested that after running Seagram into the ground and blowing the family fortune with Vivendi, he’s looking for redemption as the savior of the music industry–also the basic thesis of Goodman’s book.

Many journalists find it very curious that news of WMG’s hiring of Goldman Sachs to explore either a sale of the company or a purchase of EMI was leaked to the NY Times about 12 hours before the announcement of Junior’s criminal conviction for insider trading by a French court a couple of weeks ago, something that the WMG board surely must have know about well in advance.

Many observers think now that Junior is being forced to sell WMG the price tag for both EMI and Warner, as noted by media analyst Richard Greenfield, has been significantly lowered as a result of Citi’s offer to sell EMI back to Guy Hands at a discount.

So now speculation has arisen that Junior is frantically moving to put new financing together to go out and buy EMI on his own. But who in God’s name would back him in such a purchase in this market? Maybe an old pal would ride to Junior’s rescue.

Do svidaniya, baby!

Related Posts:

EMI: Barbarians At The Gate?

EMI: INVASION OF THE BODY SNATCHERS

THE LONG GOODBYE

Crime Pays For Junior Bronfman

WALL STREET SLAPS DOWN JUNIOR

The Fall Of The Golden Parachute

THE FOOL ON THE HILL

Winning the Gene Pool Lottery

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Posted by on Feb 1 2011. Filed under featured, Labels, Wide Angle. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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