Warner Unlikely To Call Again

Warner Music is unlikely to come in with an increased bid for EMI because a couple of its major shareholders won’t support it, according to the U.K.’s Sunday Times.

Bain Capital and Thomas H. Lee partners – two of Warner chief Edgar Bronfman Jr.’s major financial backers – would be unwilling to top the 265 pence per share offered by Guy Hands’ Terra Firma investment group, the paper’s business section reported.

The EMI board has already recommended that bid to the company’s shareholders.

Bain and Thomas H. Lee are said to believe that Warner would need to top 300 pence (US$5.90) per share to tempt the cash-strapped English music group’s investors to run the risk of regulatory hassles.

Many major business page analysts have suggested that only a merger between Warner and EMI could challenge the market-dominating Universal Music Group, but the financial premium needed to persuade EMI shareholders could be more than the U.S. company could stomach.

Bain and Thomas H. Lee backed Bronfman’s 2004 buyout of Warner from Time Inc. and relations between the three are said to be good, but the private equity houses are unlikely to want to fund a deal that prices EMI that highly – particularly when the downturn in the American record market is eroding Warner’s own share price.

Warner’s call for the European Commission to look kindly on a tie-up with EMI would likely be largely based on the premise that the global recorded music business is in a state of crisis.

The Sunday Times story was soon contested by BBC News and Financial Times, which dismissed speculation that some of Warner’s leading shareholders were against coming in again with a new offer.

However, the FT piece also appeared to hedge its bets by suggesting Terra Firma may have already approached Warner with a view to selling it EMI’s recorded music business.