EMI Settles On Terra Firma

The EMI board has recommended shareholders accept a 265p (US$5.22) per share offer from leading European private equity firm Terra Firma.

The May 21st announcement looks to end speculation that the U.K.’s only major would be bought by Edgar Bronfman’s Warner Music or private finance houses including One Equity Partners, Cerberus Capital and Fortress.

It would also seem to put an end to the theory that executive chairman Eric Nicoli would mortgage EMI’s publishing revenue to turn the company around under its own steam.

The offer values EMI at about £3.2 billion and comes via Maltby Ltd., a newly incorporated company that Terra Firma set up to do the deal.

It’s 5p per share higher than Warner’s provisional 260p per share bid and a 19.4 percent premium on the 222p the shares closed at on February 19th, the day before EMI announced it had renewed interest from the American company.

As the private equity houses have less synergies with EMI and were expected to make offers even lower than 260 pence, the company has taken the decision to cash in without risking any of the regulatory tangles an arguably more suitable deal with Warner may have involved.

Had EMI gone further with Warner, the global recorded music market may have had all four majors in front of the European Commission at the same time.

At the end of last week, EMI opened its books and requested interested parties to come back with an offer by May 23rd.

Terra Firma’s offer was clearly the best of those on the table and the London-based company apparently didn’t expect a better one in the 48 hours before deadline.

The board has accepted it and is advising EMI shareholders to do the same.

"The global music industry is undergoing significant change and, whilst EMI is confident in its ability to deliver its recently announced restructuring plans, significant uncertainty exists as to the timing and extent of future market developments," company chairman John Gildersleeve explained in a statement.

"The EMI board received a number of proposals from several different parties. Terra Firma’s offer is the most attractive proposal received and delivers cash now, without regulatory uncertainty and with the minimum of operational risk to the company."

Guy Hands, chief exec for Terra Firma Capital Partners, said his company’s objective is to build on EMI’s position as one of the world’s leading music companies.