BMG CHIEF SETS THE RECORD STRAIGHT

BMG executives are working feverishly to complete the company’s purchase of the part of Clive Calder’s Zomba Group it does not already own, but until the transaction closes, nothing will be decided about the future working relationship between Zomba (which includes Jive) and other BMG companies.

Such is the thrust of a recent memo from Chairman/CEO Rolf Schmidt-Holtz to BMG staff. In the note, a copy of which was obtained by HITS, Schmidt-Holtz warns that “there have been no official statements issued by BMG about Zomba and its future within BMG,” and says any such plans will not be made until discussions with Zomba management have taken place.

“As of today, we are in the midst of a detailed and extensive process of due diligence, which is a necessary part of advancing the transaction,” the memo, dated Sept. 13, states. “Representatives from both companies continue to work diligently to bring this to a speedy conclusion.”

“You may have seen erroneous press reports or heard rumors on BMG’s future plans for Zomba,” Schmidt-Holtz continues. “These reports should be ignored, as they are without substance and [are] based on pure speculation. As soon as possible, we intend to meet with senior Zomba management in order to open discussions on how we might best work together after the transaction is completed. Our talks will be conducted with the best possible sense of openness, fairness and partnership. Until we have had these discussions, BMG will not formulate any plans.”

Schmidt-Holtz praises as “mutually beneficial” BMG’s relationship with Zomba, which was begun in the mid-1980s. “We have always worked cooperatively and confidentially in dealing with issues that have arisen between our two companies,” he writes. “With this in mind, it’s more important than ever to be careful what we say externally about Zomba and BMG.”

Several years ago, tensions flared between the Germans and Jive, when Calder effectively poached NSYNC from BMG label RCA, just as the teenpop wave was peaking. Those tensions were later soothed, with Calder renewing Zomba’s distribution agreement with BMG.

“Zomba is a great company with a unique culture that has nurtured many talented artists and executives, and we must take all steps to protect its value,” Schmidt-Holtz continues. “I count on each one of you to play a role in this and look forward to the day when we can ‘officially’ welcome Zomba, its artists and its management to the BMG family.”

In June, Calder exercised a put option in Zomba’s agreement with BMG, which required the Bertelsmann company to begin the process of purchasing the rest of Zomba. The transaction has been widely reported to be worth nearly $3 billion.