Warner Music documents detailing the potential cost savings to be made in a merger with EMI code-named the U.S. company "Wolf" and the London-based outfit "Elk," according to London’s The Times.
This formerly confidential information emerged as part of Dick Snyder’s US$100 million (£50 million) breach of contract lawsuit against Warner chief executive Edgar Bronfman. It revealed that a deal between the two music companies would save them US$215 million a year – and that was in 2004.
Snyder, a former chief exec for publisher Simon & Schuster, was once a friend of Bronfman. But they appear to have had a falling out when Bronfman first bought Warner in 2003 and Snyder didn’t get the job he was expecting.
While the bulls have been buying EMI stock and the bears have been regretting that they sold their holdings on the back of two profit warnings, Terra Firma’s 265 pence per share offer for the only U.K. major is still prompting speculation that the wolf may be eyeing up the elk again and about to make a counter-bid.
Sharing the savings equally would have put an extra £53 million profit on EMI’s March 31, 2007, year-end figures, The Times calculated.
Taking Terra Firma’s valuation of EMI at 12.1 times underlying earnings, the paper calculated that the extra £53 million would put £650 million on the company’s market value – or 81pence per share.
However, Terra Firma’s bid may have also assumed that – having bought the company lock, stock and barrel – it could see some quick returns by hiving off EMI’s recorded music business to Warner.