EMI Leads Race For Chrysalis

Warner Music has reportedly dropped out of the chase to buy Chrysalis Music, leaving EMI as the frontrunner.

While a handful of others, believed to be venture capitalists, are understood to be involved in the auction, EMI is the most likely contender, according to The Times.

In November, Chrysalis co-founder Chris Wright invited interest in the publishing company, which holds the rights to artists including Blondie, David Gray, The Raconteurs, Black Rebel Motorcycle Club, Billy Idol and Outkast, but warned that it wouldn’t come cheap as he’s sitting on "a jewel of a business." The Times believes it will fetch about £170 million.

Wright, who is Chrysalis’ largest shareholder, will likely want to sell the business before new capital gains tax rules come into force April 6, although he is understood to be willing to hold off on a deal if a suitable price is not reached.

Guy Hands, whose private equity group Terra Firma bought EMI last year, has said he sees "potential for consolidation" in the industry.

In addition to its music business, Chrysalis also has a CD distribution arm called Lasgo. Chrysalis sold its radio business to Global Radio for £170 million in July.

News of EMI’s interest was first reported by The Times a couple of months ago, which caused some surprise as Hands was cutting costs and trying to save £200 million per year.

He is about to drop nearly one-third of the firm’s 6,000-strong workforce in a bid to create what he describes as a "new, revolutionary structure."

The March 16 edition of The Sunday Times reported that Hands has sent a letter to every employee in the group’s UK recorded-music division telling them that their jobs are officially under scrutiny.

Warner Music was reportedly bidding for Chrysalis through Warner Chappell, its music publishing arm. It’s not clear if EMI or Terra Firma would finance Hands’ bid.