Bloomberg News

Warner Music Said to Be Favorite to Win EMI’s Recorded Music

November 02, 2011

Oct. 27 (Bloomberg) -- Warner Music Group is the favorite to win EMI Group’s catalog of recorded music after bidding $1.5 billion to $1.6 billion, two people with knowledge of the talks said.

Warner Music and Citigroup Inc., which controls EMI, are negotiating expenses related to the London-based record company’s pension liabilities, said the people, who declined to be named because the talks are private.

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, one person said. Sony Corp. 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, they said.

“Do we lose any value by breaking these assets up? The answer is no,” said Alex DeGroote, an analyst at Panmure Gordon in London. “Publishing is reasonably stable, reasonably high margin. Recorded music is a very different kettle of fish and historically has been a very volatile industry.”

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.”

Preferred Bids

Citigroup may pick preferred bids and enter into exclusive talks as soon as this week if the pension issues are solved, the people said. EMI acts include The Beatles, Coldplay and Katy Perry.

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

The bank seized EMI in February after investor Guy Hands and his firm Terra Firma failed to meet loan covenants. At the time, Citigroup wrote down EMI’s debt 65 percent to 1.2 billion pounds ($1.9 billion). The bank has a target price of $4 billion for the sale of the entire company and $1.7 billion for recorded music, one person said.

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, the people said. Mubadala Development Co., a sovereign fund of Abu Dhabi, is also an investor with Sony, the New York Post reported Oct. 21.

Vivendi Withdraws

Billionaire Ron Perelman’s MacAndrews & Forbes Holdings Inc. 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 billionaire Len 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.

Blavatnik, 54, has been active in bidding for media assets through his Access Industries investment arm. Last year, he unsuccessfully bid for Metro-Goldwyn-Mayer Inc., a U.S. entertainment firm, a person with knowledge of the offer said at the time. In 2009, he bought the U.K. distribution arm of Mel Gibson’s Icon Group, gaining international rights to the actor’s work and films including “Driving Miss Daisy” and “Dances With Wolves.”

--With assistance from Serena Saitto in New York and Matthew Campbell in Paris. Editors: Rob Golum, Anthony Palazzo, Kenneth Wong

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; Amy Thomson in London at athomson6@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net


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