Russian Record Rumblings

Russian-American businessman Len Blavatnik may be making an offer for Warner Music, a move that could spark a flurry of deals that will shake up the recorded music business.

The Russian-born U.S. billionaire, who has made his fortune from his media and metal businesses, already has a stake in Warner and spent four years on the board until 2008.

UK newspapers including the Sunday Times are speculating that Blavatnik, who has homes in New York and London, will face competition from private equity groups such as Kohlberg Kravis & Roberts and Dutch music investor Imagem.

The British media is divided over what will likely happen to Warner and how much that will impact the future of EMI. Some papers say CEO Edgar Bronfman Jr. has put Warner up for sale to beat EMI to the market.

Others say Bronfman will sell part of the American company only to ease competition issues before making an offer for EMI.

The Financial Times says Universal Music and Sony’s separate recorded music and music publishing businesses are also tracking the process closely, in anticipation of what’s expected to be a wholesale shakeup of the recorded music and music publishing industries.

It also says Bronfman is widely believed to be hoping for a bid for Warner-Chappell that would provide it with the funds to bid for EMI, sealing a deal the two companies have pursued for a decade.

But this could be derailed by a full bid for Warner Music, low bids for Warner-Chappell, its publishing business, regulatory interventions or pressure on Warner’s finances.

Blavatnik has a 2 percent share of Warner Music, which has suffered a slump in its share price since it was floated in 2005.

The Moody’s and Fitch ratings agencies have each warned they might lower Warner’s credit ratings after a disappointing earnings statement this month.

EMI chief exec Roger Faxon says he expects U.S. bank Citigroup, which seized the company Feb. 1 after it defaulted on its loans, will sell the company. But he doubts that it’s in any hurry to put it on the block.

KKR’s BMG Rights Management is being put up as a likely bidder but Faxon says he wouldn’t be averse to former owner Guy Hands buying back the company.

“Guy has been a very supportive owner. He believes in the strategy, so I think he would be a fine owner going forward,” he told the Daily Telegraph.

“In my tenure as chief executive, he was nothing but supportive of our strategy and our approach. Guy saw a huge opportunity in the business and I don’t think he was wrong about that. The quantum of the price, he and others said that was far too high. But he did see an opportunity and that was not wrong.”