Private Equity-owned Companies in Times Square

1540 Broadway

Private equity owners: Thomas H. Lee Partners, Bain Capital

Owned by private equity: 2004-2005

Deal value: $2.6 billion

Employees: 4,000

When you head into the Times Square Virgin Megastore to scoop that new Missy Elliott, Jewel, Kid Rock or Nickelback CD, you can whistle a tune called the Warner Buyout Blues. Soon after the 2004 buyout, private equity firms Bain and Thomas H. Lee laid off 1,000 Warner Music employees, (20% of the workforce) and ended contracts with nearly half the artists on the label’s roster. Despite these losses, the Thomas H. Lee-led group recouped some of its investment. Just seven months after the buyout Warner Music returned $342 million to the investors and paid a dividend of $8 million taken from existing cash. Two months later, the company took out a $700 million loan, of which $681 million was used to pay additional dividends to the buyout firms and senior management and repurchase a significant portion of their common stock. The next spring, just eighteen months after the company had been taken private, Warner announced it was making an initial public offering. According to an article in Forbes, the buyout partners made $3.2 billion on a $1.3 billion outlay in just a little over a year. Two years later, the buyout’s benefits to Warner are hard to see. At press time, Warner’s stock was trading at $14.45, still below the I.P.O. price of $17. Oh, and that Pink Floyd CD you were going to buy— it’s put out by EMI Records, itself now the target of a $4.7 billion buyout by a UK-based buyout firm.