Bloomberg News

Blavatnik Said to Pull EMI Bid After Failing to Reach Terms

October 31, 2011

(Updates with analyst comment, BMG response starting in fourth paragraph.)

Oct. 31 (Bloomberg) -- Warner Music Group owner Len Blavatnik withdrew his bid for EMI Group’s recorded music business after failing to agree on a price with owner Citigroup Inc., two people with knowledge of the situation said.

Warner Music offered about $1.5 billion, less than the $1.7 billion sought by Citigroup, said the people, who requested anonymity because the talks are private.

The two sides may still resume talks, one person said. New York-based Citigroup has been fielding offers separately for EMI’s recorded music and publishing assets. The bank took control of London-based EMI, the record label of Coldplay and Katy Perry, in February after the previous owner failed to comply with loan terms.

“The wider capital market environment is problematic for getting deals done, and it’s a buyer’s market at the moment,” said Alex deGroote, an analyst at Panmure Gordon & Co. “I would imagine there’s an element of negotiation to still take place. A deal will get done. Citigroup is not a long-term owner.”

Amanda Collins, a spokeswoman for New York-based Warner Music, declined to comment, as did Mark Costiglio, a spokesman for Citigroup. Dylan Jones, with EMI in New York, also declined to comment. The Financial Times reported the move by Blavatnik yesterday.

BMG, Sony

Warner Music had emerged as the favorite to win EMI Group’s catalog of recorded music after bidding $1.5 billion to $1.6 billion, people with knowledge of the talks said last week. Pension liabilities were among the remaining issues, the people said.

BMG Rights Management GmbH, the music company controlled by KKR & Co., is the front runner for EMI’s publishing business with a bid of $1.8 billion to $2 billion, another person said last week. Annika Reiche-Seiz, a BMG Rights spokeswoman in Berlin, declined to comment.

Sony Corp. last week asked Citigroup for more time to raise money and recruit investors for a bid for the unit, which markets and licenses the rights of work by songwriters including Beyonce Knowles for use in films, ads and other performances, the people said.

More in Parts

Citigroup may be able to get more for the 114-year-old record company by selling it in pieces, something EMI Chief Executive Officer Roger Faxon initially resisted. Faxon said in a memo obtained by Bloomberg News last year that “the best way to build value is for EMI to remain as one company” and that selling off catalog assets would be “utterly idiotic.”

Sony wants to add EMI publishing to its Sony/ATV Music Publishing venture with the estate of Michael Jackson. Sony has recruited Ari Emanuel, the William Morris Endeavor talent agency’s CEO, and Raine Group LLC, the media investment bank founded by Joe Ravitch, to join its bid, people said previously. Mubadala Development Co., a sovereign fund of Abu Dhabi, is also an investor with Sony, the New York Post reported Oct. 21.

Billionaire Ron Perelman’s MacAndrews & Forbes Holdings Inc. had asked Citigroup to consider its offer for all of EMI, a person said. Vivendi SA’s Universal Music Group, the biggest record company, has withdrawn its bid for EMI’s recorded music division, another person said.

Warner Music was acquired by Blavatnik in May for about $3.3 billion, including $1.99 billion in debt, after a three- month auction. Warner had worked on a possible offer for EMI before it was seized by Citigroup, a person familiar with the plan said at the time.

--With assistance from Ragnhild Kjetland in Frankfurt. Editors: Rob Golum, Kevin Miller

To contact the reporters on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net; Zachary R. Mider in New York at zmider1@bloomberg.net

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


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