EMI’s Long Player

The sale of EMI drags on with various bidders reportedly either pulling out or threatening to do so in what may have become a game of bluff and double bluff.

In the last week or so, business writers on both sides of the Atlantic appear to have gone into tailspin, with various reports suggesting that one leading player or another had stacked its hand and walked away from the table.

The New York Post said Warner Music owner Len Blavatnik pulled out because the stakes were too high, while in the UK The Guardian claimed he was the likely winner due to Universal Music Group giving up the chase.

The Post reckoned Blavatnik quit because his top offer of £1.5 billion didn’t match U.S. banker Citigroup’s expectations, but the English paper said it was enough to seal the deal and suggested the former bastion of the English music business would soon be sold to “a Russian-born billionaire.”

The Financial Times was in the Post camp and also reported that Blavatnik had walked away, although some in the U.S. business media said he was only pretending to have pulled out in order to show Citi he’d been pushed to his limit.

This apparent high-stakes game of brinkmanship was further complicated by suggestions that Universal may also have been bluffing when it said it had made its final bid.

Citigroup took control of EMI in February because former owner Terra Firma, which is likely to be its last English owner, defaulted on the loan it needed to buy it for £4.2 billion in 2007.

There was immediate speculation that it’d dispose of what was described as a “toxic asset.” It was confirmed at the beginning of June when Citi officially put EMI on the block.

The U.S. bank may win its own game of brinkmanship if can get more than $3.5 billion for EMI, despite having to split the recorded and publishing divisions, but the risk is that neither Blavatnik nor Universal is bluffing.

Most papers agree the publishing segment will likely go to BMG Rights Management, which was said to have outbid Sony Corp with an offer between $1.8 billion and $2 billion.

The latest speculation is whether Citi would want to sell the publishing division if it can’t sell the recorded music business.

But Citi’s already past the point when it would have expected to have announced the sale of both, and there’s no economic signs to indicate that EMI’s value will increase within the next two years or that any potential bidder would find it easier to persuade a bank to lend the money needed to buy it.