EMI, Warner Music in $4.6-bn takeover feud

LONDON: EMI and Warner Music were locked in a two-way $4.6 bn takeover battle on Wednesday, with each trying to acquire the other to create a combined company that would shrink the industry to three dominant players. London-based EMI Group, home to Coldplay and Robbie Williams, said it had rejected a £2.5bn ($4.6 bn) cash offer from its smaller US rival, calling the bid “wholly unacceptable”.

At the same time, EMI revealed that it had sweetened its takeover bid for New York-based Warner Music, whose artists include Madonna and Red Hot Chili Peppers, to $31 a share or $4.6 bn in total, from its original May offer of $28.50, although the new bid was also rejected. “EMI continues to believe that an acquisition of Warner Music by EMI at $31 per share in cash would be very attractive to both sets of shareholders and would deliver value to EMI’s shareholders which is far superior to Warner Music’s revised alternative proposal,” it said.

However Warner Music declined to comment.Financial advisers for both companies are still engaged in discussions, sources said, though it remained unclear whether either company was in position to raise its offer again. “I think it will die down,” said one person close to EMI, who requested anonymity. “There’s nothing more to come from us (today),” the source added.

Analysts ultimately believe a deal will be struck between the two companies because of the inherent logic of a combination, but exactly when remains up in the air. A merger would produce several hundred million pounds of cost savings, analysts estimate. The timing of the negotiations is also complicated by Bertelsmann AG’s current sale of BMG Music Publishing, which owns the copyrights to thousands of songs.

The company is estimated to be worth at least 1.5 bn euros ($1.9 bn), and both Warner and EMI are among the suitors.
The developments are the latest in a years-long quest to put the companies together, which would create a rival on par with music majors Universal Music, owned by French conglomerate Vivendi, and Sony BMG, a joint venture between Sony and Bertelsmann.

An attempt to merge the companies in ‘00 was rejected by European antitrust regulators and EMI lost out to Warner Music’s current ownership when Time Warner sold it in ‘03.

On June 14, Warner Music, the world’s fourth largest music company , offered 315 pence a share for EMI, a bid that was rejected about a week later and accompanied by a raised counter-offer of $31 a share.

A few days after that, Warner Music returned with its own sweetened bid of 320 pence.

Analysts and industry executives had speculated that Warner Music’s main owners, which include Chief Executive Edgar Bronfman Jr. and a group of private equity firms, were keen to sell their stakes and cash out of their two-year-old investment.

Analysts ultimately believe a deal will be struck between the two companies because of the inherent logic of a combination, but exactly when remains up in the air.