Majors Overpriced

While a host of interested buyers hover around Warner Music Group and EMI, longtime media analyst Richard Greenfield reckons both firms are overpriced.

Greenfield, who’s now with New York investment brokerage BTIG, thinks that – with both companies on offer at about £2.5 billion – EMI is the better buy.

The hard-hitting Wall Street analyst believes EMI’s music publishing is far better positioned than that of Warner-Chappell.

He also points out that WMG has $1.5 billion of net debt, so a $2.5 billion purchase price would equate to an equity value of about $1 billion. The majority of the acquisition price would be used to get the company’s head above water.

“The recording side is clearly a sinking hot mess, but the fantasy of stable publishing has also gone poof,” he told readers of his regular blogs. “Warner’s music publishing revenues are now falling, as mechanical declines are more than offsetting growth in sync and digital,” he said.

“Given the view that global digital music sales will begin to decline over the coming year, music publishing’s earnings stream is nowhere near as safe and steady as it has been historically viewed.”

Beyond the vanity element that drove Guy Hands and Terra Firma’s disastrous acquisition of EMI, Greenfield said he couldn’t see a reason why anyone would pay $2.5 billion for WMG, particularly while EMI is also up for sale.