EMI Up For Auction?

EMI looks to have put itself up for auction by opening its books and announcing May 23rd as the deadline for bids.

One Equity Partners – part of JP Morgan Chase – is one of the finance houses reportedly interested, along with Cerberus Capital and Fortress.

Warner Music, which has repeatedly tried to get together with EMI, is another said to be in the frame.

Some business analysts say the fact that EMI has set up a data room where interested parties can pore over its finances indicates the ailing U.K. music giant is definitely up for sale.

It might appear that executive chairman Eric Nicoli – chief exec since Alain Levy was booted in January – has given up on the idea of the company turning itself around under its own steam.

But if the bids don’t meet the mark, he still has the option to press ahead with a securitisation of EMI’s music publishing assets as a method of reducing debt.

The London-based company has already appointed Deutsche Bank and the Royal Bank of Scotland to look at the potential securitisation options.

The London-based company may have been playing chicken, hoping that such a move might cause potential bidders to react quickly to avert such a deal.

Private equity houses would almost certainly want to leverage their bids against that income, while Warner would need to sell the golden goose – or its own publishing wing – to have a hope of getting regulatory approval.

Last month, EMI announced it was dropping digital rights management for songs sold through Apple’s iTunes, which is the polar opposite of Warner’s strategy and therefore hardly likely to encourage a higher bid

At close of business May 17th, the EMI share price stood at a little more than 245p. Warner’s conditional bid is still believed to be at 260p, while the private equity groups – which wouldn’t benefit from the same synergies as the U.S. company – are widely reported to be pitching in at 255p.

U.K. papers including the Daily Telegraph are saying EMI wants around 300p.