Why Warner Music Shares Just Jumped 16%

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This part isn’t about the music, really.

It’s about making a killing off of something about to be sold, which definitely describes Warner Music Group.  And with that in mind, comments from suitor Bertelsmann sent investors rushing into Warner shares (WMG) during Tuesday trading.  By the bell, WMG had gained 13.25 percent to $6.58, after hopping as high as 16% during the day.

So what’s Bertelsmann’s plan?  “Bertelsmann, ladies and gentlemen, is ready to invest into the right business, at right price, and at the right time,” CEO Hartmut Ostrowski boldly declared.

Lovely, but so what?  Well, the ‘so what’ is that Bertelsmann feels a lot more confident about its financial situation, and reports suggest a possible buyout in motion.  According to German paper Handelsblatt, the price tag would be in the $2.5-3 billion range, and due diligence may already be underway. “Restructuring is pretty much done and debt is no longer an issue,” CFO Thomas Rabe rattled. “Financially speaking, Bertelsmann is ready to invest again.”

Bertelsmann, part owner of BMG Rights Management, has already been involved in the WMG derby, but seems mostly interested in publishing assets.  Exactly where that slots the recording dead weight remains unclear.

Separately, Bertelmann is also seriously looking at EMI.  That has yet to be formally put on the market, though few expect Citibank to stay in music for long.