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BMG and Universal may co-bid for Warner and EMI

By | Published on Tuesday 3 May 2011

BMG Rights Management

BMG and Universal might make a joint bid to buy EMI, according to a report in the Daily Telegraph, and the two firms might even mount a last minute bid to buy Warner Music together. If either were successful it is thought BMG would take any publishing assets while Universal would take ownership of the record labels.

That’s a big “if” though. In the case of Warner Music, it is thought two of the various parties who have bid to buy the US-based music major in recent months – Len Blavatnik’s Access Industries and a consortium led by the Gores brothers – will be asked to make final formal offers this week.

BMG’s previous bid to buy the whole Warner Music Group was knocked back based on the price it was offering. Even if, through an alliance with Universal, the company could now outbid Blavatnik and the Gores (and that seems unlikely), or those two big bidders both dropped out at the last minute (which is possibly what BMG is hoping for), the combined BMG Universal offer wouldn’t necessarily win the approval of the Warner board.

First, said board has said it wants Warner to be sold to one buyer as a going concern, and for it not to be split up, as BMG and Universal reportedly plan. Second, any major sale of assets to Universal Music – the world’s biggest music company – is sure to attract the attention of competition regulators in the US or Europe, slowing down any sale. The Telegraph says Universal insiders reckon they have found a way to circumvent regulatory concerns via their BMG partnership, but not everyone will share their confidence on this issue.

A BMG/Universal acquisition of EMI is more likely – given they aren’t entering at the final hurdle there – though even then they are not likely to be preferred bidders, and for the same reasons as with Warner. First, current EMI owner Citigroup has reportedly assured the music company’s top man Roger Faxon that its intent is to sell the London-based music major to one buyer as a going concern. And second, a Universal acquisition of EMI’s record labels would almost certainly spark the interest of European competition regulators, both EMI and Universal being headquartered within the EU.

Though, that said, if BMG and Universal did offer the highest price, given how much Citigroup has already written off with regards Terra Firma’s disastrous takeover of EMI in 2007, which it financed, the bankers might have to accept a bid that would result in their music asset being broken up, whatever the strategic logic in keeping the EMI publishing and record label businesses together.

Citigroup is expected to start publicly taking bids for EMI in the next two months, so we’ll no doubt see sooner rather than later if there is any truth in the BMG/Universal alliance reports.

Talking of the EMI sale, Charlie Allen, the former ITV boss who was involved in Terra Firma’s running of EMI, on an executive level at one point, says that the best outcome of any upcoming sale would be for one wealthy individual to take ownership of the big British music company. So much so, he told The Telegraph, he’d be happy to advise any rich dude interested in making such a bid. Yeah, wouldn’t we all, because one assumes Charlie wouldn’t provide said advice gratis for the good of the British music industry.