Investor Group Led by Thomas H. Lee Partners, Edgar Bronfman, Jr., Bain Capital and Providence Equity Partners to Purchase Warner Music Group and Create One of the World's Largest Independent Music Companies

Business Wire, Nov 24, 2003

Entertainment Editors/Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 24, 2003

-- Investor Group to Purchase Recorded Music and Music Publishing

Businesses in Their Entirety for Approximately $2.6 Billion in

Cash

-- Time Warner Retains Option to Buy Back Minority Stake in

Businesses

Time Warner Inc. (NYSE:TWX) and an investor group led by Thomas H. Lee Partners, Edgar Bronfman, Jr.'s Lexa Partners, Bain Capital and Providence Equity Partners today announced the sale of Time Warner's Warner Music Group, including its recorded music operations and Warner/Chappell music publishing business, to the investor group for approximately $2.6 billion in cash and other consideration, including the option of buying back into the business on favorable terms in the future.

This purchase would create one of the world's largest independent music companies - home to an extraordinary roster of recording artists and songwriters; some of the best-known record labels in the industry, including Warner Bros., Atlantic and Elektra Records; and Warner/Chappell Music, one of the industry's largest music publishing companies with more than one million copyrights.

The company will retain the name Warner Music Group.

Investor Group to Build on Warner Music Strengths

"Warner Music Group is one of the world's greatest recorded music and music publishing companies, and we have great faith in its potential for growth as an independent company and in the long-term opportunities of this industry," said Edgar Bronfman, Jr. "We have brought together a highly sophisticated and well-financed group of investors to support the business. I personally look forward to working with Roger Ames and his outstanding management team to build on Warner Music's strengths, including its distinguished tradition of entrepreneurship and artist development. Together, we will continue to drive towards Warner Music's full potential."

Scott M. Sperling, Managing Director of Thomas H. Lee Partners, said: "We look forward to partnering with Warner Music Group's talented management to build upon its world-renowned franchise and industry-leading brands. While we do not foresee an immediate upturn in the overall market for recorded music, we believe opportunities are emerging that bode well for the long-term future of the business and that Warner Music will continue to be in the forefront of capitalizing on these opportunities."

Time Warner Chairman and CEO Dick Parsons said: "I'm very pleased that we are putting our music company in such capable hands. Despite my personal fondness for the music business as well as for all of our wonderful managers and music group employees, I believe that this transaction is clearly in the best interests of our company's shareholders. Not only will it greatly enhance our financial flexibility, it also will enable us to pursue higher growth opportunities in our other lines of business. At the same time, we expect to continue to work closely with Warner Music, and we are happy to have the option to participate in the music industry's eventual recovery. We thank Roger Ames for his superb leadership of the Warner Music Group over the past four years, and offer him and all of our music colleagues our best wishes."

Jeff Bewkes, Chairman of Time Warner's Entertainment & Networks Group, said: "With this investor group's deep commitment to the music business, we believe this deal is the best outcome for the people of our music company, our stellar roster of artists and their millions of fans around the world. Even with this sale, we look forward to continuing to work closely with Warner Music through a number of productive relationships involving our other divisions. Finally, we appreciate the tremendous efforts of Roger and his management team in strengthening Warner Music and helping to make this deal happen."

Roger Ames, Chairman and CEO of Warner Music Group, said: "I have every confidence that Warner Music will thrive under Edgar's leadership. His passion for the music business is clear, and his understanding of the creative process will be enormously important. It's an exciting chance to return to the independent roots that the music industry was built upon with what will be one of the world's largest independent music companies. These factors, along with the solid foundation we've built at the Music Group, mean we're very well positioned to take advantage of the technological advances that are spurring the industry's next phase of growth. I look forward to working with Edgar, as we strive to master the challenges our industry is facing."

Highlights of Transaction

The investor group will buy Warner Music Group in its entirety on a debt-free basis for approximately $2.6 billion. Time Warner has the option to buy up to 15% of the Company at any time during the three years following closing, and as much as 19.9% of the Company under certain circumstances.

This sale is expected to reduce Time Warner's reported net debt by approximately $2.6 billion. Any taxable gains from the transaction will be offset by existing capital and net operating losses.