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Five players expected to make final bid for EMI

By CMU Editorial | Published on Monday 3 October 2011

EMI’s four main music business rivals and the conglom headed up by billionaire Ronald Perelman are expected to be the five organisations which present final bids for EMI on Wednesday, or at least that’s what sources are telling the Financial Times and other financial media.

As previously reported, Citigroup, which put EMI up for sale in early summer having repossessed the music firm from previous owner Terra Firma in February, has set a 5 Oct deadline for final offers. Although various billionaires and private equity consortiums have considered making a bid, insiders reckon that, at the final hurdle, there will be less interest from outside the existing music industry than there was when Warner Music was on the block earlier this year. Sony, Universal, Warner, BMG and Perelman’s MacAndrews & Forbes are expected to make final offers for some or all of EMI.

It is thought that Sony, whose music publishing company Sony/ATV will make the bid, is only interested in EMI Music Publishing, while Universal Music will only bid for the EMI record labels. According to the FT, both BMG and Warner Music were still considering a bid for EMI in its entirety as of the end of last week, though both might ultimately put in offers for just half of the company, BMG most likely going for publishing (despite their CEO once indicating an interest in the recordings catalogue) and Warner for the EMI Music record labels.

It is thought that Perelman too is only interested in taking one half of the company, though he is of two minds as to which half. When Warner was up for sale he collaborated with Sony/ATV on a bid, the plan being that Perelman’s business would take the labels and the Sony subsidiary the publishing catalogue. It’s thought the billionaire is still considering a similar partnership on this bid. Another option would be to buy EMI outright, but licence the entire publishing or recordings catalogue to another music company.

Some commentators still reckon that the consortium led by Ron Burkle that bid for Warner Music – which included Napster and Facebook co-founder Sean Parker – might also make a last minute bid. Certainly the New York Post seemed certain that was on the cards last week. However, with the Burkle bid an outside possibility, and Perelman seemingly not interested in operating the EMI Group in it’s entirety should his bid be successful, the chances of the sale resulting in considerable change at EMI now seem high.

It’s known current EMI boss Roger Faxon is keen for the publishing and recordings businesses to stay in common ownership, but this is now most likely to happen if Warner or BMG win the bidding, but either of those deals would result in EMI’s various divisions being integrated in with the bidder’s existing operations. Though either transaction might enable Faxon himself to keep his job, Warner’s executive structure is still in a state of flux following its sale earlier this year, while BMG – focused, as it is, primarily on publishing rights – might recognise the value of having Faxon, and his vast experience in music publishing, on board.

That said, there is another option. Although Citigroup is keen to sell EMI soon, insiders there say that doesn’t mean the US bank is treating this as a fire sale, if the right price isn’t on the table it’ll seriously consider postponing the sale until when the wider economic climate is looking more rosey. That might enable the independent or private equity bidders who have fallen out of the race this time to return to the table with a deal more likely to keep EMI in tact as a going concern.

Though if the right deal or deals are on the table come Wednesday, it’s thought an announcement could be made on a sale within two weeks.