What Now For Nicoli?

The deal that takes EMI back into private hands is likely to be wrapped within a month as Terra Firma mops up the last 9 or so percent of the U.K. company’s shareholders.

Whatever the fate of current chief exec Eric Nicoli, he seems relieved to finally make a deal to merge or sell the stock-listed business.

"It reduces the number of owners in EMI from around 18,000 shareholders with widely differing investment goals, to just one," he told staff in an internal memo picked up by Financial Times.

"It puts an end to the incessant speculation about the future ownership of the company and the uncertainty that brings to us all," he added, although the incessant speculation about his own future is likely to continue for at least another few days.

During his seven years at the helm, the value of the company has plummeted more than even its major international rivals.

In 2000, shortly after he took the helm, he had the first of many dalliances with potential buyers in the shape of what was then AOL Time Warner.

Although it was the height of the dotcom boom and share prices of entertainment and new media companies were all feeling the benefit, the Daily Telegraph noted the takeover bid of 800 pence per share still says much about EMI’s fall from grace.

After Edgar Bronfman Jr’s consortium bought Warner Music from AOL Time Warner, the courtship continued but it was often hard to see who was the leading partner.

The issue was further complicated by Nicoli’s occasional efforts to get hitched with Germany’s Bertelsmann Music Group.

The dotcom boom that buoyed the EMI share price soon began to undermine it as the advance of digitally downloaded music, both legal and pirated, saw new entrepreneurs benefit from the major music companies’ hesitation to react.

Last year, a 320 pence per share offer from Warner was derailed when the European Court decided the community’s monopoly authorities needed to take a second look at the Sony-BMG merger.

Warner didn’t feel confident of running the risk of having the EU scupper the deal and preferred to wait until it knew the Sony-BMG outcome.

After knocking back a 310 pence per share offer from the Permira investment house in December, Nicoli began to test the shareholders’ patience by releasing two profit warnings in a month.

They led to Alain Levy being ousted as head of music and Nicoli moving from executive chairman to chief executive.

It could be argued that Nicoli’s stewardship of the company is the principal reason Guy Hands and his Terra Firma investment group got hold of EMI for as little as 265 pence per share.

However, the U.K. business pages aren’t expecting Hands to show his gratitude by letting Nicoli hang on to his job.

Hands has put together a £4 billion funding package, £1.5 billion of equity and £2.5 billion of debt, which is enough to cover EMI’s existing £800 million debt and the trading shortfalls that can be expected while he tries to turn EMI around.

"He needs to put some cash into the business. EMI has not been able to attract enough big-selling artists. Being able to offer decent advances is one way of achieving this," Bridgewell Securities analyst Patrick Yau told the Telegraph.

Hands may be mindful that this strategy hasn’t always led to success for EMI, particularly the £60 million record deal with Mariah Carey in 2001.

The American diva produced a flop album, had a breakdown and walked out with more than £20 million in compensation for her deal being torn up.

Whatever Hands has in mind for EMI – various representatives have said he doesn’t intend to split the company and hive off the record division – the takeover is likely to be one of the last the leading investment banks will finance for the foreseeable future.