Analysts Say EMI Deal Doubtful

Within a week of attracting interest from Permira equity group boosting EMI shares by more than 10 percent, U.K. business journalists are doubting the deal will happen.

On the back of analysts from Goldman Sachs estimating that a Permira bid would come in at 295 pence (US$5.81) per share – less than a penny more than the December 4th closing price – The Times of London and The Guardian ran pieces suggesting it’s unlikely to be high enough to please the EMI board.

The previous weekend, there was speculation Permira would offer 310 pence, but that’s still below the 320 pence Warner Music offered in the summer.

Warner is always likely prepared to pay more. Apart from buying the company, it also benefits from the massive synergies created by molding the two music outfits together, an advantage that’s not available to the private equity group.

Anyone who believes the regulation authorities will eventually allow Warner to buy EMI, or vice versa, should probably look to buy shares in the British company as a long-term investment. For everyone else, EMI is a sell.

If the Permira deal is knocked back, the most likely and immediate result is that the EMI share price would fall to below 295 pence.

According to The Sunday Times, the late-November share hike came when hedge funds including Hadron, GLG Partners, Eminence Capital and investment houses including Schroders, Henderson and Standard Life all plunged in because they anticipated a private equity bid.

— John Gammon