Bloomberg News

Warner Music Owner Blavatnik Said to Consider Ending EMI Offer

October 08, 2011

Oct. 8 (Bloomberg) -- Warner Music Group’s owner, Len Blavatnik, is considering dropping his bid for EMI Group Ltd. because Citigroup Inc. is taking too long to choose a buyer, a person with knowledge of the bidding process said.

Blavatnik has told people involved in the auction that he may drop his offer in several days, said the person, who requested anonymity because the negotiations are private.

The billionaire investor wants Citigroup to decide whether to sell London-based EMI, the record label of Coldplay and Katy Perry, as a whole or in pieces, said the person. Blavatnik is also concerned about EMI pension liabilities and tax issues, the person said.

Alejandro Moreno, general counsel for Blavatnik’s New York- based Access Industries, declined to comment, as did Dylan Jones, a New York-based spokesman for EMI. Mark Costiglio, a spokesman for Citigroup, also declined to comment.

Warner Music and billionaire Ron Perelman are each vying for all of London-based EMI, and may bid for the recorded music operations if the company’s parts are sold separately, people with knowledge of the situation said this week. Billionaire Ron Burkle has a partner and was also preparing an offer, they said.

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

Market Conditions

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

A pension that covers 21,000 U.K. employees may have a liability of at least 400 million pounds ($622 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.

Market conditions have complicated efforts to raise financing. Leveraged-loan issuance in the U.S. dropped 58 percent in the third quarter with losses mounting amid a faltering economy.

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.

--Editors: Rob Golum, Cecile Daurat

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

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


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