New EMI owners Terra Firma are reportedly close to raising £250 million in their previously reported bid to share the risk of the major music firm with other investment types through an equity sale - the private equity firm is said to be selling off 15% of the company to raise the funds. According to the Times, the investors putting up the cash have been told Terra Firma bosses can boost EMI's profits from £61 million in 2007 to £528 million in 2012.
Neither EMI nor Terra Firma have commented on those reports, though some in the city say the move is a good thing in that it shows other finance types share Terra Firma chief Guy Hands' belief that the smallest of the major record companies can turn round its fortunes pretty rapidly. Though others are still questioning Hands' motive for bringing in other investors - he insists doing so is standard practice in the private equity game (and he's not entirely wrong), though others say it is a sign that EMI was in a much worse state than the private equity chief believed before completing his takeover.
According to the Times, papers distributed to the new investors say that Terra Firma plans to turn round the fortunes of EMI through a combination of radical cost cutting - at least £135 million a year - and by driving forward mobile and online download sales where profit margins are higher. The Times also say those papers say Terra Firma plan to bail out of EMI in 2012, selling the major for around about £9.4 billion, compared to the £3.2 billion Hands paid for it. The papers also speculate as to who might buy EMI for that kind of money in 2012, admitting that one buyer may be long time suitor Warner Music, though adding that a bid from a media conglomerate like News Corp or web giant like Google may be a more likely because the music major will be by then "ideally placed to be a digital content engine for the broadband pipes of the future".
So, there we have it. In not entirely unrelated news, Radiohead's Ed O'Brien has told The Observer that Terra Firma and Hands were the reason his band didn't re-sign to EMI. As much previously reported, Radiohead completed their recording obligations to EMI's Parlophone with 2003's 'Hail To The Thief', and were free to take new longplayer 'In Rainbows' to any label. EMI were rumoured to be in the running to release the much anticipated new album, but in the end the band decided to self-release it online, and to go with independent XL for the physical release.
Explaining their decision, O'Brien says that by the time the album was ready to go Hands was in charge at EMI and that he didn't know what to offer the band. O'Brien: "EMI is in a state of flux. It's been taken over by somebody who's never owned a record company before, Guy Hands and Terra Firma, and they don't realise what they're dealing with. It was really sad to leave all the [EMI] people. But he wouldn't give us what we wanted. He didn't know what to offer us. Terra Firma doesn't understand the music industry".