City news anyone? According to the Times, financial services company Credit Suisse has estimated that the total cost savings of an EMI Warner merger could exceed £200 million, which is about £40 million more than previously estimated. If others back that judgment, it could persuade both parties to increase their bid prices as both EMI and Warner continue to attempt to stage a takeover of the other.
Credit Suisse has based its estimate of the cost savings a merger would produce by comparing EMI and Warner with Universal Music, which is already about the size a combined EMI Warner would be. According to the Times, Universal is achieving an underlying profit margin of 16.9 per cent, while EMI and Warner are achieving profit margins of 9.9 per cent and 12.8 per cent respectively. Based on those figures and some complicated equations (I assume, it's possible they just made an educated guess), Credit Suisse reckons the pre-tax savings of an EMI Warner merger would be at least £182 million, and maybe quite a bit more.
Whether that kind of report will persuade EMI and Warner to up their respective offers remains to be seen. So far it has been assumed that, while both sides are bidding for the other, EMI are more likely to take over Warner than the other way round. However, the Times reports that Hugh Hendry of Eclectica, a shareholder in both companies, has leant his support to Warner's takeover proposal, while criticising EMI's proposals. The paper quote him as saying that EMI are "behaving like civil servants, and Warner like true investors".