EMI, Warner Music et Madonna.
EMI hopes Warner Music hits the right note
Last updated at 10:23 PM on 2nd May 2011
The final bars of the $3billion (£1.8billion) three-month auction of America’s Warner Music are about to play out.
But once the deal is completed, it won’t be the end of the upheaval in the music industry; overtures are likely to be made towards British rival EMI.
The shake-up in ownership comes amid a backdrop of continued declines in music sales which are forcing executives to explore new business models.
London-based EMI, home to artists including Robbie Williams and Kylie Minogue, is currently in the hands of US investment bank Citigroup, which seized control from private equity firm Terra Firma in February.
Citigroup provided £2.6billion of debt for the 2007 buyout of EMI but took over the label and wrote off most of its debts after Guy Hands’ firm defaulted on its loans.
Two or more offers for Warner Music are expected to be tabled in the auction’s final round, which closed yesterday.
Top of the pops in the chart of bidders are Russian-American businessman Len Blavatnik and American billionaire brothers Tom and Alec Gores.
Blavatnik’s Access Industries is fighting against a consortium of Tom Gores’s mergers and acquisitions vehicle Platinum Equity and his brother Alec’s private equity firm, Gores Group.
Numis Securities media analyst Lorna Tilbian said: ‘Whoever gets Warner Music will undoubtedly take a look at EMI next. It’s the same old story with EMI – it has got to get together with someone else to exploit the synergies.’
According to reports, banks including UBS and Credit Suisse have offered up to $2.2billion in debt financing while bidders are expected to inject around $1billion of equity.
City analysts reckon that whichever of the Blavatnik or Gores bids emerge victorious, both are likely to shift their sights onto an acquisition of EMI from Citigroup.
The new owner of Warner Music would probably seek to combine its recorded music operations with those of EMI and save millions of pounds in costs.
Also said to be eyeing music acquisitions are Universal Music Group and BMG Rights Management, the music business owned by private equity firm KKR and German media giant Bertelsmann.
The pair could work together to make an offer for EMI. They are thought to have formulated a deal that would avoid competition issues by carving up EMI and Warner’s global music catalogues.
BMG is understood to covet the publishing arms and catalogues. Universal wants the recorded music operations.
Since Citigroup took control of EMI the company has become a much more attractive proposition for potential bidders.
Its debt was slashed by 65 per cent from £3.4billion to £1.2billion via a recapitalisation by Citigroup.
EMI is also sitting on a robust balance sheet of £300million cash.
Source: Mail Online.
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