Napster Roxio Bids $5.3 Million ...

LONDON (Reuters) - CD-recording software maker Roxio Inc ROXI.O emerged as the potential new owner of Napster on Friday, bidding to buy the revolutionary song-swapping site for $5.3 million in cash and stock.

The Nasdaq-listed company filed an offer to a Wilmington, Delaware, bankruptcy court on Thursday to purchase Napster's assets for $5 million in cash and 100,000 warrants for Roxio stock. Roxio's shares ended Thursday's session at $3.38.

The deal hinges upon approval by the bankruptcy court, which has been overseeing the sale of Napster's assets since the track-trading service filed for Chapter 11 protection in September. But it appears Roxio has a solid inside track.

"We believe that at this time, Roxio provides the greatest financial recovery to creditors in this bankruptcy case and is an ideal strategic buyer for Napster's assets," Rick Chance, managing director of Trenwith Securities, the U.S. investment firm handling the Napster asset sale, said in a statement.

Trenwith said it reached a sale agreement with Roxio after conducting numerous rounds of negotiations with multiple parties.

More than a dozen bidders, including Barcelona-based adult entertainment company Private Media Group PRVT.O , had emerged as possible buyers of Napster's assets.

Rival bidders still have until Nov. 27, the date the court is expected to rule on the offer, to top the Roxio bid, officials said.

NOT FREE, BUT CHEAP

The Roxio offer price is considered relatively cheap for a song-swapping service that in its heyday attracted tens of millions of young music fans, a group highly desirable to record labels looking to cultivate a loyal following.

Trenwith Securities originally asked that offers for Napster's technology begin at $6 million.

With the exception of Private's $2.4 million all-stock bid, none of the offers, nor the identities of the bidders, have been made public.

If its offer is approved, Roxio would receive all of Napster's intellectual property including its technology patent portfolio and world-renowned brand name, but Roxio is not assuming any of Napster's liabilities, including pending litigation, it said in a statement.

Roxio's bid could put an end to the lengthy saga of the music industry's biggest nemesis in recent years.

At its height two years ago, Internet users traded tens of millions of music files across Napster's network, ushering in an era of rampant online song piracy in which high-quality recordings could be downloaded onto a computer hard drive for free.

The major music labels, which blame online piracy for a dramatic drop in CD sales, took Napster to court for copyright infringement, essentially shutting it down in July 2001.

The Napster phenomenon triggered an explosion in Internet file-swapping. Newer, more advanced services such as Kazaa and Morpheus MusicCity enable Internet users to trade all manner of copyrighted materials, from songs to video games and movies.

Napster's popularity attracted the strongest interest from Germany's Bertelsmann BERT.UL , which invested tens of millions of dollars in the service, hoping to cash in on the outfit's global audience of avid music fans.

But Napster ran out of money before it could figure out a way to legitimize the technology and charge consumers for downloads.

In September, the bankruptcy court blocked Bertelsmann's bid to buy the Napster assets. A group of unsecured creditors and music publishers also filed a proceeding that month to keep the German media giant from being first in line to claim any sales proceeds.

Roxio, a maker of a range of software products that allow computer users to copy and edit music, photos and video onto CDs and DVDs, has expanded its product range over the past year to allow consumers to record and share digital media.

The company said it would not discuss the implementation of the Napster technologies, brand name and Web site until the deal is finalized.