Bloomberg News

EMI Bids Said to Likely Come in Lower Due to Tight Debt Markets

October 05, 2011

Oct. 5 (Bloomberg) -- Citigroup Inc. may receive lower bids than expected for EMI Group Ltd. due to tight credit markets, and may be forced to break up the record label or halt the sale, several people with knowledge of the matter said.

Second round bids for EMI, home to the Beatles and Coldplay, may total $3 billion to $3.2 billion, said two of the people, who weren’t authorized to speak publicly. A piecemeal sale could fetch $3.75 billion, one person said. The bank could also try again when debt markets improve, they said.

Offers are due this week, these people added, with Citigroup expected to pick winning bids in two to three weeks. Six different parties are expected to bid, said the people, with some seeking either the recorded music business or the publishing assets, and others bidding for all of the company. Some plan to make two offers -- for the whole company and for a piece of the business, one of these people added.

Len Blavatnik’s Warner Music Group and billionaire Ron Perelman are each vying for all of London-based EMI, and may bid for the recorded music business if the parts are sold separately, two people said. Billionaire Ron Burkle has a partner and is also preparing a bid, people said.

Vivendi SA’s Universal Music Group is interested in EMI’s recorded-music business, these people said. Sony Corp. and KKR & Co.-controlled BMG Rights Management Gmbh are separately interested in EMI’s publishing, said two people.

Some of the bidders are lowering their offers after Citigroup disclosed additional liabilities for pensions and leases the company signed for U.K. music stores that were later shuttered, these two people said.

Liabilities

A pension that covers 21,000 U.K. employees may have a liability of at least 400 million pounds ($619 million), said one bidder. Citigroup has pegged the cost closer to 150 million pounds, people said. EMI is also liable for leases of several closed HMV Group Plc retail locations in the U.K., they said.

Citigroup seized control of EMI in February after the label’s owner Terra Firma Capital Partners failed to meet debt terms.

The bank began the sale process in June when borrowing costs for private-equity funds and some corporate borrowers were lower. Over the summer, Sanford C. Bernstein & Co. estimated EMI may be valued at about $4 billion in a takeover. That price was higher than the $2 billion to $2.8 billion value Fitch Ratings estimated in January.

Dylan Jones, a spokesman for EMI, declined to comment, as did Mark Costiglio, a spokesman for New York-based Citigroup.

--With assistance from Amy Thomson in London, Matthew Campbell in Paris and Cristina Alesci in New York. Editors: Rob Golum, Elizabeth Wollman

To contact the reporters on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net

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


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