Bloomberg News

Vivendi’s Universal Music Said to Consider Return to EMI Auction

November 07, 2011

Nov. 5 (Bloomberg) -- Vivendi SA’s Universal Music Group may get back into the bidding for the recorded-music assets of EMI Group from Citigroup Inc., reversing a decision to abandon the auction, people familiar with the situation said.

Len Blavatnik’s Warner Music Group may also revive talks with Citigroup if it can secure concessions, such as a lower breakup fee and liability waivers in the event of delayed regulatory approval, people familiar with Blavatnik said. They declined to be identified because the discussions are private.

While Blavatnik ended talks with Citigroup over a price dispute, one person said, he could start them again. The billionaire owner of Warner Music was prepared to offer about $1.6 billion. Citigroup was seeking about $1.9 billion.

Peter Lofrumento, a spokesman for Universal, declined to comment, as did a Citigroup spokesman. Will Tanous, a spokesman for Warner Music in New York, also declined to comment.

Citigroup may be able to get more for the 114-year-old record label EMI by breaking it into pieces, a strategy initially resisted by Chief Executive Officer Roger Faxon.

BMG Rights Management GmbH, the music company controlled by KKR & Co., is vying with Sony Corp. for EMI’s publishing arm, which may fetch about $2 billion, people familiar with the situation have said.

EMI artists include The Beatles, Coldplay and Katy Perry. Citigroup seized the label in February after investor Guy Hands and his private equity firm Terra Firma Capital Partners failed to meet loan covenants. At the time, the bank wrote down EMI’s debt 65 percent to 1.2 billion pounds ($1.9 billion).

Blavatnik, 54, bought Warner Music in May for about $3.3 billion, including $1.99 billion in debt after a three-month auction.

Stores, Pensions

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

A pension that covers 21,000 U.K. employees may have a liability of at least 400 million pounds, said one bidder. Citigroup has pegged the cost closer to 150 million pounds, people said earlier. 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.

--With assistance from Amy Thomson in London. Editors: Chris V. Nicholson, Anthony Palazzo

To contact the reporters on this story: Matthew Campbell in Paris at mcampbell39@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net; 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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