EMI Group to support $4.7 billion buyout bid
LOS ANGELES: EMI Group, one of the largest music conglomerates in the world, has said that it would recommend that shareholders accept a 2.4 billion buyout offer from a private investor, Terra Firma Capital Partners.
The board of EMI said Monday that it would recommend that shareholders approve the $4.73 billion offer from Terra Firma. If approved, the deal would remove EMI from the public markets, where its financial problems have included two profit warnings to investors this year.
EMI, which is based in London and releases music by the Beatles, Norah Jones and Coldplay, has spent years in and out of merger talks with various potential buyers. Terra Firma could profit from the deal by subsequently selling EMI, in whole or in part, to a rival like Warner Music Group, with which EMI was in advanced merger talks last summer.
Those discussions stalled after a European Union court ruling raised questions about the regulatory approval of an earlier music merger between Sony and Bertelsmann.
Terra Firma offered 265 pence a share of EMI, a premium to the last Warner offer of 260 pence a share. But that is considerably less than the figures being discussed last year, when EMI and Warner made a series of offers and counteroffers for each other.
EMI shares were up 9 percent on Monday, closing at 271 pence, on speculation that Warner might sweeten its offer. Shares rose to 273 pence in trading Tuesday afternoon.
Warner had been seen as able to offer a higher bid than a private investor because of the costs it would save by absorbing EMI and slashing overhead in a combined operation. But EMI, in recommending the Terra Firma offer, said it came “without regulatory uncertainty and with the minimum of operational risk to the company.”
EMI also announced Monday that it had posted a net loss of 288.5 million for its latest financial year, because of restructuring charges. Sales dropped 15 percent to 1.8 billion after a dramatic slump in purchases of CDs.
The company brought forward its earning announcement by two days so that it would accompany news of the offer.
John Gildersleeve, chairman of EMI, said that the offer by Terra Firma was the best of several it had received.
“Terra Firmas offer is the most attractive proposal received and delivers cash now,” he said.
The offer comes as the Internet continues to upend the lock that record labels once had on the distribution of songs. “The global music industry is undergoing significant change,” Gildersleeve said. “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.”
Terra Firma is led by Guy Hands, who built up Nomura Holdings buyout business in the 1990s before leaving in 2002 to run his own firm with Nomura support. Last month, Hands lost out to Kohlberg Kravis Roberts in the 11.1 billion takeover battle for Alliance Boots, the British pharmacy chain.
EMI has established a reputation after having beaten its larger rivals, Universal Music Group and Sony BMG, in moving its catalogue to the Internet, despite widespread piracy of digital copies of music.
In April, EMI said it would make its recordings available on Apples iTunes and other music downloading services without copy protection, a step that other recording companies have resisted. The European Commission responded by saying that EMI and Apple faced an antitrust investigation over the pricing of songs on iTunes.
Information from The Associated Press was used in this report.
