Investment Groups Target EMI

EMI shares soared more than 10 percent as the London-based company revealed that it’s received an approach from an unnamed party.

The company released a statement a little after midday November 28th, after the share price had risen more than 11 percent from 269.25p to 291.50p since the market opened, although it steadied during the afternoon to close 10.58 percent up at 290.00p.

More than 70 million shares were traded during the course of the day’s business.

Earlier, the Financial Times reported that several private equity firms were considering a £2.5 billion bid.

The following day, The Times, The Guardian and The Daily Telegraph were among the papers saying the bid is thought to have come from Permira and Apollo Management private equity groups.

The U.K. reports were quick to quote analysts who said it was very unlikely that the bid had come from the giant Kohlberg Kravis Roberts investment group and the buyout arm of Goldman Sachs, which were the two companies suggested by the New York Post.

Under the provisions of the Takeover Code, stock-listed companies have a statutory obligation to notify the market no later than a day after such an approach has been made.

It’s unlikely the bid has come from Warner Music, and the increased share price is still some way below the 320 pence per share offer EMI previously rejected.

Business analysts believe further consolidation among the big four record companies will be on the backburner until the European court rules on whether Sony and Bertelsmann can merge their music businesses.

The European Court of First Instance has challenged the European Commission’s decision to clear the merger in 2004 and is unlikely to announce its verdict until next summer. This could open the door to private equity firms.

Sony BMG, Warner Music, Universal Music and EMI – the world’s four largest music companies – control nearly 80 percent of the global market for recorded music.

The one figure that stood out most in EMI’s recently published half-year results was the £6.2 million it cost to fail to cut a deal with Warner Music.

It put nearly 20 percent on “exceptional” items including the £33.5 million cost of ongoing restructuring, although that may turn out to be cheap compared to what a longer courtship might have cost.

As Sony and BMG have already found, a happy romance between two companies is no guarantee that the indie music sector won’t step in just before – or even after – they’ve managed to tie the knot.

On the trading front, EMI’s overall revenues fell 4.1 percent to £867.9 million, while pre-tax profits more than halved to £18.6 million, compared with £41 million last year.

But it’s not as if EMI isn’t used to finishing with a flourish to get in the money. And it’s likely that new releases from Robbie Williams, Norah Jones, Keith Urban, and Joss Stone will produce the upswing Gorillaz and what analysts called the “make or break” album from Coldplay provided last year, when it went to No.1 in 32 countries.

Even if there isn’t a single album to equal the success of X&Y, there’s strength in depth with new releases also coming from Vasco Rossi, Depeche Mode, Moby, The Thrills, The Magic Numbers and the new “Beatles” release – a compilation created by the band’s legendary producer Sir George Martin and his son Giles.

— John Gammon