Thorn Obtains Virgin Music : Entertainment: The $973-million deal between the British firms will make Thorn one of the industry’s giants.

LONDON —  Thorn EMI gained control of nearly 18% of the global record market--and added the Rolling Stones, Janet Jackson and Paula Abdul to an already sizable roster of artists--when it agreed Friday to acquire Virgin Music Group for a head-turning $973 million.

The deal between the two British firms puts EMI in the company of such industry giants as PolyGram and Warner Music Group. And it signals further consolidation in the music business, with EMI swallowing the world’s largest independent record company.

Founder Richard Branson, just 20 when he started Virgin two decades ago, has been given the title of president for life, the companies announced. The rest of Virgin’s management will also be left in place under the deal, said Jim Fifield, EMI’s president and chief executive.

“We’re obviously not going to take away the creative spark and entrepreneurial spirit,” Fifield said. “I’m just glad we were the ones who won out.”

The sale gives Branson $695 million to invest in his latest passion, Virgin Atlantic Airways, part of a business empire that also includes publishing and retailing operations. The 41-year-old executive, known for his flamboyant personal style, said, “As far as we’re concerned, we end up with the best of both worlds.”

In characteristic style, Branson sent letters Friday to all of Virgin’s 1,000-plus employees, explaining the sale and apologizing for “any uncertainty” he may have put them through. Branson invited feedback on the sale--providing his home address for replies.

In Los Angeles, Al Teller, chairman of MCA Music Entertainment Group, called the Virgin deal a watershed event. “The sale of Virgin closes the last chapter in the history of the established independents,” he said. “The record industry is now composed of a handful of giant international players.”

Sources said Germany’s Bertlesmann and Universal City-based MCA Inc., a unit of Japan’s Matsushita Electric Industrial Co., were among the final bidders. Fujisankei, a Japanese company that owns 25% of Virgin, had the right to match any offer, but chose to sell to EMI.

Serious negotiations began about nine months ago, according to one source close to the deal. “Branson, all along, preferred to do it with a British company,” the source said. “It appealed to him more than becoming part of an American, German or Japanese company.”

MCA and Bertlesmann eventually dropped out over the price, according to sources near the talks. The agreement between EMI and Virgin was concluded at 2 a.m. Friday, London time.

Industry sources called the Virgin acquisition a good strategic move for EMI, which already owns such labels as Capitol, EMI, Chrysalis and SBK.

Virgin had operating profit of $36.5 million on sales of $567.6 million in the fiscal year ended July 31. EMI had music operating profit of $192.1 million on sales of $1.75 billion in its fiscal year ended March 31, 1991.

“They’re a very huge company now,” said entertainment mogul David Geffen, who sold his independent record label to MCA in 1990. “This sale consolidates the record business even further.”

Some, however, said EMI paid too much.

“The price is set by what they (EMI) think they can get out of this,” said Harold Vogel, a securities analyst with Merrill Lynch in New York. “But it looks expensive to me. I don’t think the catalogue is very deep. Why the price came out where it is I don’t understand.”

One theory making the rounds in record industry circles is that EMI will use the Virgin deal to sweeten a planned sale of its music business. A top industry executive said he expects EMI to “spin off the music division, take it public and cash out” within a period of months.

EMI could not be reached for comment on a possible offering.

Under Branson’s guidance, Virgin has been one of the industry’s steadiest performers. Its worldwide artistic roster includes Phil Collins, Peter Gabriel, Steve Winwood and Neneh Cherry, in addition to Abdul and Jackson. The Rolling Stones will join the company in 1993.

When Branson offered Janet Jackson a $40-million deal last March, industry insiders complained that the British tycoon was inflating the superstar contract market simply to attract suitors for his company. His subsequent deal with the Rolling Stones--$45 million over six years--intensified the squall.

“In order to present Virgin Records as a credible label, Branson needed major stars and had no choice but to pay a lot of money for Janet and the Stones,” said entertainment attorney Don Engel, who has orchestrated numerous pop superstar deals in recent years.

And from Branson’s standpoint, “it obviously paid off,” Engel added. “In a sense, it was like signing Janet and the Stones put him in a different income-tax bracket. Without them, the numbers he could negotiate for would have been geometrically less.”

Free-lance writer Jeff Kaye reported from London, Chuck Philips from Los Angeles. Times staff writer Alan Citron in Los Angeles also contributed.