EMI’s Bid and Trading Sagas
Permira and Apollo Management, the private equity groups, are understood to have together approached EMI about a deal that could value the company at more than £2.5 billion, or £3.5 billion including debt.
Shares in EMI surged more than 10 per cent yesterday to 289½p, valuing the group at £2.3 billion, after it said that it had “received a preliminary approach”. It did not identify the bidder and said that a deal might not result.
It is understood, however, that Permira has been working with Apollo on a deal.
It is thought that no price has been put on the approach to EMI, but it is estimated that any bid would have to be priced well above the 320p that the company rejected from Warner Music in the summer. EMI’s board is unlikely to recommend a bid below 350p in cash per share, which could well deter a private equity consortium.
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Other private equity players are also thought to have been eyeing the group, raising the prospect of a bidding war.
Private equity firms are believed to be attracted to the repeat cash flows of EMI’s publishing business — the division that owns the rights to the Motown back catalogue. The division is the world’s largest, accounting for 20 per cent of the global music publishing market.
Warner Music, the world’s fourth-largest music group, has already succumbed to private equity sponsorship. Edgar Bronfman Jr, with private equity firms, paid $2.6 billion (£1.34 billion) in cash to take Warner, which is listed in New York, from Time Warner in 2004.
The approach for EMI, which numbers the Rolling Stones, Robbie Williams and Coldplay among its artists, comes as the group sits exposed after the breakdown of its latest attempt to merge with Warner. Talks between the two have been put on ice after a ruling by the European Court of First Instance that challenged the merger between the recorded music businesses of Sony and Bertelsmann.
The ruling cast doubt on whether an EMI-Warner deal would get regulatory clearance.
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Regulators had already blocked a planned Warner-EMI tie-up in 2000.
During bid talks in the summer, when EMI — chaired by Eric Nicoli — and Warner were trying to buy each other, EMI rejected a 320p-a-share approach from Warner.
Although that could set a bidding floor, industry sources also said that a private equity buyer would not have the synergies offered by a trade rival.
Analysts said that EMI’s other division — recorded music — would probably be hived off in any private deal because of its more risky nature in relying on blockbuster artists and being more exposed to threats such as new technologies.
Simon Wallis, an analyst at Collins Stewart, said: “There is a logic for a deal spinning off the publishing business and turning around the operating profitability of the recorded music business.”
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