More major label merger nonsense for you. Over there in New York, the lovable Warner Music Group yesterday issued its own statement regarding the ongoing merger talks between themselves and London based EMI. This followed that statement by EMI earlier this week that confirmed both parties had now made two unsuccessful bids for the other.
While some analysts reckon that Warner's main objection to EMI's most recent offer is still the offer price, the major's statement yesterday also identified some of the conditions of the proposal that they had problems with. The statement read: "The EMI proposal also includes several important pre-conditions which increase execution risk. These include, in particular, the pre-sale of Warner/Chappell Music and underwriting a substantial rights offering. The WMG and EMI proposals each also include certain other pre-conditions and conditions, including regulatory approvals and due diligence. However, the WMG proposal to EMI is not subject to a pre-condition requiring the pre-sale of EMI's music publishing business, nor would it carry an equity financing condition."
Warner concluded: "The WMG board agrees with EMI that there are potential merits in combining the businesses of WMG and EMI, but believes that a WMG acquisition of EMI will provide shareholders of both companies with a superior opportunity to realise significant value in their shareholdings."
This, of course, is essentially the same as the concluding statement issued by EMI earlier this week, only in reverse. EMI's board said: "The Board of EMI continues to believe that [our current offer] would be very attractive to both sets of shareholders and far superior to Warner Music's revised alternative proposal".
Behind the scenes there is increasing chatter regarding Warner's tactics in all this. EMI clearly want a simple cost effective deal which allows them to over night grow to a similar size to other rivals Universal Music and SonyBMG - their strategy hasn't really changed since they tried to buy Warner Music off previous owners Time Warner back in 2003. Arguably Warner want the same thing, but some continue to question the motives of Edgar Bronfman Jnr's key financial backers, who don't seem to be the sorts of people who would want to stay in the still insecure music space indefinitely, and who will surely, at some point soon, want to make good their 2004 investment when they bought the major off the aforementioned Time Warner.
The EMI offer, price permitting, is surely an easy way for those investors to bow out of the music space within the year with a healthy profit in their pockets. So, why come forward with the counter-offers? Do they think they could make a bigger buck by creating a Universal sized mega-major and then floating it? Possibly, but given that they must know EMI chief Eric Nicoli is in no mood to sell just now, many reckon the counter-offers are a bluff designed to strengthen Warner's hand at the negotiating table - to show EMI that they have other options, and therefore force the London major to offer the best possible price. Whether EMI can afford that best possible price remains to be seen.
PS: By the way, pan-European indies body IMPALA have just announced they will, unsurprisingly, oppose any EMI Warner merger should the two companies reach any agreement. Any merger would need EC approval, and that's where IMPALA would try to block it. As you'll remember, the trade body opposed the SonyBMG merger when it was at EC approval stage, and is still fighting the EC's decision to allow the merger through the European courts, even though the two companies combined their operations just under two years ago.