So, that all happened a bit quicker than everyone was expecting. Following all that speculation regarding which private equity firms were considering takeover bids for EMI, and whether they'd be able to outbid Warner Music, the board of EMI Group yesterday announced it was recommending to its investors that they accept a cash offer from a European investment outfit called Terra Firma. They are offering 265 pence per share, five pence per share more than the most recent Warner takeover offer, and ten pence per share more than what other private equity firms were rumoured to be considering offering.
The board told the London Stock Exchange that it considered the offer to be "fair and reasonable" adding that it intends to "recommend unanimously" that EMI shareholders should accept the proposal. In his statement to the LSE, EMI chairman John Gildersleeve said: "The EMI board received a number of proposals from several different parties. Terra Firma's offer is the most attractive proposal received and delivers cash now, without regulatory uncertainty and with the minimum of operational risk to the company". Stock in the major soared by almost 10% on the announcement.
Gildersleeve insisted that EMI was in "good shape", despite the announcement coinciding with the publication of the group's year end financial report which confirmed revenue declines in both the major's recording and publishing divisions. His board's support for the takeover offer was, he said, a move to "safeguard the company's future". He concluded: "The global music industry is undergoing significant change and, whilst EMI is confident in its ability to deliver its recently announced restructuring plans, significant uncertainty exists as to the timing and extent of future market developments".
In a joint statement, Terra Firma's CEO Guy Hands added: "Terra Firma's objective is to build on EMI's current position as one of the world's leading music companies and accelerate the development of its digital and online strategy to fully exploit this long-term growth opportunity".
Assuming EMI's investors follow their board's recommendation, it will be interesting to see how Terra Firma, and Hands, deal with becoming overnight major players in the recording and music publishing sectors. Presumably, given the fact that the deal has board support, Terra Firma has indicated support for the company's current restructuring programme and for the senior execs, some of them only recently appointed, who are overseeing that programme.
That said, on their website Terra Firma say: "We add value through integrating ourselves directly into the companies we buy. Our in-house operational team works closely with our financial team during the due diligence phase of each deal and then, post-acquisition, they go directly into the company, often forming an integral part of interim management. This deep involvement by operational professionals, combined with their alignment of interest, helps us to deliver consistently high returns" - which doesn't sound like an investment house planning to take an entirely back seat role in turning round EMI's financial performance.