EMI Drifts Toward Terra Firma

In its tenth press statement since the beginning of July, EMI has repeated its call for shareholders to accept Terra Firma investment group’s £2.4 billion offer to buy the company.

As of July 20, the day of the latest release, investors controlling approximately 26.19 percent of the stock (212.4 million shares) indicated their intention to take the all-cash offer from financial entrepreneur Guy Hands’ private equity firm.

It’s considerably more than the three or four percent who had accepted before Warner Music Group and an investment group fronted by former EMI chef exec Jim Fifield both confirmed they wouldn’t be making a counter offer.

The struggling British music company was scornful of Fifield’s claim that his bid had been scuppered by the Takeover Panel’s July 19 deadline, expressing "serious doubts about the credibility of any possible offer."

It also rubbished his statement that said that he’d been in "very advanced discussions" about a cash offer at "a significant premium" to Terra Firma’s 265 pence per share bid. But the EMI board looked far from convinced that he could raise the money to back it.

Terra Firma has extended the time it’ll leave the offer on the table (from July 20 to July 29), presumably hoping shareholders who’d held out in case the English investment company’s May 21 bid sparked an auction would approve the offer.

Since it’s failed to flush out a higher bid, the EMI shareholders look to be gradually accepting that Terra Firma is the only game in town.

The news caused EMI shares to dip five pence to 262 pence, three pence lower than Hands’ group’s offer.

EMI had rejected a 320 pence per share approach from its US rival during the summer of 2006. The European Court of First Instance then reopened its review of the Sony-BMG merger, which ended talks between the two companies.

The UK business papers have already started speculating that Warner will return and try to buy EMI’s recorded music business from Terra Firma, although some are pointing out that Fifield may have a similar plan in mind.

The passing of the deadline and Warner’s confirmation that it wouldn’t make a counterbid spiked the U.S. company’s stock eight percent to US$ 14.92.