EMI Publishing Up For Grabs?

The Financial Times and the Daily Telegraph are among UK papers reporting that Terra Firma is touting the idea of selling a 49 percent stake of EMI Music Publishing. The New York Post is reporting U.S. equity firm Kohlberg Kravis Roberts is already talking about a deal.

Interest from any of the major publishers such as Warner Music Group, Sony or Universal might attract scrutiny from the regulatory authorities.

The Post says KKR is looking to buy a slice of EMI and roll it up into a separate entity that would still be 51 percent owned by EMI, while the rest would be held by KKR’s part-owned BMG Rights Management, German media giant Bertelsmann’s remaining music business interest.

Last September KKR paid $332 million for a 51 percent stake in BMG Rights Management. Since then, BMG has been on a buying spree, acquiring Crosstown Records and Cherry Lane Music Publishing.

Guy Hands’ equity firm Terra Firma has just raised the £105 million needed to avoid breaching its loan covenants to Citigroup, but realistically EMI has only enough money to survive another six months before it will need to raise more money to meet future covenants. Terra Firma has struggled to service the £3.2 billion Citigroup loan it used to part-finance the £4.2 billion purchase of EMI in 2007.

While Hands was raising the latest round of investment, there were reports that KKR – which appears keen to expand its music business portfolio – was in talks with Warner about launching a breakup bid for EMI.

Selling a slice of its music publishing business, which has 1.3 million copyrights including songs from Beyoncé and Alicia Keys, would keep Citigroup off Terra Firma’s back for several years.

Having removed the threat of Citigroup coming through the door, EMI would be better positioned to renew talks to license its North American music rights to one of its rivals.