And now, by popular demand, more on the EMI Warner merger proposals. EMI yesterday sent a formal letter to Warner Music saying it would seriously consider any takeover offer the US major was planning to make, but that aside from considering the price the potential buyer would be offering, they would need to be convinced that any merger between the two majors would get the go ahead from EU regulators. It seems that, despite Warner winning the support of pan-European independents body IMPALA for their proposed takeover of EMI, the London based major remains cautious regarding the chances of getting an EMI Warner merger approved by the European Commission.
The letter follows a week when the possibility of an EMI Warner merger became very real again. As much previously reported, both EMI and Warner gave up their 2006 bids to take over the other when, in July last year, the European Courts ruled the Sony BMG merger of 2004 should never have been approved by the European Commission. It was felt that, in that environment, EC officials would be unlikely to approve further consolidation in the record industry.
But with EMI becoming increasingly vulnerable to takeover following recent disappointments in its financial performance, Warner announced this week that it had secured the support of IMPALA for its EMI takeover plans. As it was legal action by IMPALA that led to the 2006 reversal of the Sony BMG merger approval, Warner think that support will clear the way for gaining EC approval for an EMI purchase. Though, of course, other affected parties may still oppose the merger, and EMI chiefs seem to want more assurance from Warner regarding their strategy for securing regulator approval before considering any offer.
Given their caution regarding a Warner merger, EMI are also reportedly sounding out other non-music companies regarding a takeover. According to the Financial Times, One Equity Partners, an affiliate of JP Morgan Chase, are possible buyers of EMI, although if there are any informal takeover talks going on between the major and the investment firm they are very much at an early stage. Other banks and investment types, meanwhile, are said to be in talks with Warner about financing its possible takeover of EMI - with the Times reporting that both Goldman Sachs and Lehman Brothers are expected to help fund the $3.9 billion cash offer Edgar Bronfman Jnr is expected to make for the London music company.
PS: Talking of the financial press, there was an interesting story in the Wall Street Journal this week alleging that Warner actually made a full on offer to buy EMI just last month, offering $4.7 billion, but that that offer was turned down. If true it surely seems unlikely EMI chiefs would accept a $3.9 billion offer five weeks later, even if regulator concerns are lessened somewhat, unless things have really taken a turn for the worse at EMI in the last month.