Bloomberg News

Billionaire Alec Gores Said to Consider Offer for EMI Group

June 22, 2011

(Updates with Blavatnik starting in second paragraph.)

June 22 (Bloomberg) -- Billionaire Alec Gores may offer to buy the British record company EMI Group after coming up short in last month’s auction of Warner Music Group Corp., according to a person with knowledge of the situation.

Len Blavatnik, who won the auction for Warner Music, is also considering a bid, according to two people with knowledge of his plans. They join Vivendi SA’s Universal Music Group, which is also weighing a move, a person said.

Citigroup Inc., which owns EMI, said this week it plans to sell the music company or take it public. The bank took over London-based EMI, the label of Katy Perry and Coldplay, in February after the record company failed to meet the terms of loans used to finance a 2007 takeover by investor Guy Hands.

The decision to seek a buyer makes industry consolidation more likely, even with suitors facing potential regulatory hurdles, according to Laura Martin, an analyst at Needham & Co. Blavatnik agreed to buy New York-based Warner Music for $3.3 billion, including debt.

Gores may seek to partner with his brother, Tom, the billionaire founder of Beverly Hills, California-based Platinum Equity, said the person, who sought anonymity because the deliberations are private.

Another option for Gores would be to reach out to other music companies on a joint offer, said the person.

Terry Fahn, an outside spokesman for Los Angeles-based Gores Group, declined to comment.

Record companies including EMI and Warner Music have faced shrinking revenue and piracy even as the digital music industry boomed with the advent of Apple Inc.’s iPod and its iTunes music store, the largest retailer of digital tracks with 28 percent of the total U.S. market, according to NPD Group.

Global Sales

Global music sales may begin to grow again in 2013, the accounting firm PricewaterhouseCoopers said in a report last year. Industry revenue totaled $26.4 billion in 2009.

Blavatnik wants to complete the acquisition of Warner Music, scheduled for next month, before moving ahead with an EMI bid, said two people with knowledge of the plans. While a merger would lead to cost savings and boost market share, Blavatnik doesn’t consider EMI essential to his Warner Music plans, said the people, who weren’t authorized to talk publicly.

To avoid overlap, Blavatnik would also have to get rid of one music production business if he owned both companies, one person said.

Universal Music Group, the world’s largest music company, is also weighing a proposal, said a person with knowledge of the plans. Chief Executive Officer Lucian Grainge aims to structure an offer that addresses regulatory concerns, said the person, who requested anonymity because the preparations aren’t public.

--Editors: Rob Golum, Romaine Bostick

To contact the reporters on this story: Jonathan Erlichman in New York at jerlichman1@bloomberg.net; Andy Fixmer in Los Angeles at afixmer@bloomberg.net; Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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