3RD TIME CHARM
Warner Music Group yesterday made a fresh takeover offer for struggling record label EMI Group, signaling that the days of EMI as a standalone company could be coming to an end.
News of WMG’s latest run at EMI comes nine days before the European Commission is to rule on the legality of the 2004 merger creating SonyBMG.
The EC, which is also reviewing Universal Music Group’s $2.1 billion deal for BMG’s music publishing catalog, will decide on March 1 whether to approve the SonyBMG deal or open an in-depth, four-month inquiry.
While industry observers predicted WMG would steer clear of EMI until there was more regulatory clarity, a source close to WMG told The Post in December that the Edgar Bronfman-led company was considering revisiting a deal sooner rather than later.
“From our perspective, we’re not sure the regulatory issues are a show-stopper,” the source said at the time.
In a sign that WMG is looking to smooth over any potential regulatory speed bumps, the company struck a landmark agreement with Impala, a trade group representing independent record labels, under which the organization won’t contest a WMG-EMI merger and will provide “full and complete support” in exchange for concessions.
The concessions include providing funding for but not taking a stake in Merlin, a digital-rights-licensing platform for independent music companies, and selling certain WMG record labels to independent labels if a WMG-EMI deal is approved.
The move is significant because Impala has been a vocal critic of major label consolidation and is opposing both the SonyBMG and UMG-BMG deals.
The deal marks the first time Impala has worked in tandem with a major label, and a source said it was Bronfman who made the decision to “engage rather than fight” them.
Despite WMG’s efforts to quell opposition to any deal it strikes with EMI, there are other hurdles that both companies will have to overcome.
EMI has issued two profit warnings in as many months and was forced to combine its Capital and Virgin Records labels in the U.S. in order to cut costs.
WMG finds itself in worse financial shape than last summer, when EMI turned down the company’s 320 pence offer. WMG’s first quarter net income plunged 74 percent to $18 million, while revenue fell 11 percent to $928 million.
WMG’s stock closed trading yesterday at $19.15 per share, less than $2 above its 52-week low of $17.56.
Though its shares jumped to 240 pence per share yesterday on the news of the revived WMG talks, EMI’s stock is also significantly lower than during the last round of talks with WMG, and sources said that the group won’t fetch nearly as much as the 320 pence offer it turned down.
“Those numbers are completely off the table,” this source said.
People familiar with the company said it would be a managerial miracle if EMI Chairman Eric Nicoli could get an offer of 300 pence per share this time around.