Capitol Records Scores Victory in the Bullfight for Matador

After a fierce five-month bidding war, Matador Records has found a new home.

The upstart New York label, which broke ties with Time Warner’s Atlantic Group in January, is about to join forces with Capitol Records, a division of British entertainment conglomerate Thorn EMI.

Representatives for Capitol and Matador declined to discuss details of the contract, but sources said Matador owners Chris Lombardi and Gerard Cosloy will receive between $8 million and $12 million to sign the five-year joint venture agreement. The deal, which sources say will include an additional $8-million line of credit, could be announced as early as Monday, although some financial details are still unresolved.

“Matador is a perfect fit for us as we continue to bud and grow in new directions,” said Capitol Records Chief Executive Gary Gersh, who recently scored hits in the alternative rock world with albums by Everclear, Sparklehorse and the Foo Fighters. “Chris and Gerard have exquisite taste and bring an astonishing array of talent into the mix.”

Founded in 1989, Matador is one of the most highly regarded independent labels in the industry. Over the past seven years, Lombardi and Cosloy have signed and nurtured a string of acclaimed underground acts, including Liz Phair, Pavement, Guided by Voices, Bettie Serveert, the Jon Spencer Blues Explosion and Yo La Tengo.

The popularity of Matador’s artists at college radio, however, has yet to translate at the cash register. Indeed, the last album by Phair, the biggest seller on Matador’s roster, did not break the 500,000-unit sales mark.

In 1993, Matador caught the eye of former Atlantic Records President Danny Goldberg, who signed Lombardi and Cosloy to a joint venture pact. But the deal proved to be unprofitable and relations between Matador and Atlantic deteriorated after Goldberg was deposed last year during a corporate blood bath.

Current Atlantic chief Val Azzoli decided last fall to cut back on joint venture deals and allowed Lombardi and Cosloy to shop the label elsewhere.

Closing the Matador deal is perceived as a coup for Gersh, who has been trying to beef up Capitol’s alternative rock credentials since taking over in 1993. He snagged Matador after Goldberg, now president of Mercury Records, and Geffen Records Chief Executive Ed Rosenblatt dropped out of the bidding.

The deal is the latest of three promising pacts negotiated by Gersh, which include ventures with the Beastie Boys’ Grande Royale Records and the Foo Fighters’ Roswell Records.