Job Cuts Likely As EMI Restructures

Hundreds of jobs could be at risk at EMI as new owner Terra Firma undertakes a strategic review of the company, according to news reports on both sides of the Atlantic.

The U.K.’s Times quoted a company spokesman saying "anything and everything is a possibility," while the paper – along with New York Post – also suggested Guy Hands’ private equity group may be in discussions to dilute its holding in Britain’s only major recorded music business.

Neither course of action would be much of a surprise. Hands is open about the fact that he usually ditches management teams in the companies he buys. Most of the old senior EMI hierarchy has already gone and it wouldn’t be unusual for a private equity deal of this size to be syndicated in this way.

Just before the EMI deal was done, reports in the U.K.’s Daily Telegraph and Sunday Times suggested that the tightening of the credit markets might mean that Citigroup, which lent Terra Firma £2.5 billion of the £3.2 billion it needed to finance the deal, was becoming nervous about its commitment.

According to the New York paper, Hands has already met with dozens of private-equity firms, hedge funds and other institutions in a bid to recoup some of the money Terra Firma has poured into the takeover.

While the company has yet to make its first debt payment as part of the EMI purchase, the Post said the cost-saving measures under review are aimed at "prettying up" the balance sheet for when it has to show the books to the lender banks.

Terra Firma has said that it plans to exploit the opportunity to develop EMI’s publishing catalog, while streamlining its recorded music business and making it more focused on digital revenue streams.

The report in The Times said EMI’s physical music distribution business could be where the cuts will draw most blood, with the packing and shipping being farmed out in the future.