Warner Issues Counterbid Of $4.56 Billion for EMI Group By JESSICA HODGSON and TASKA MANZAROLI Wall Street Journal
June 28, 2006 5:32 a.m. http://online.wsj.com/article/SB115148016148492875.html?mod=home_whats_news_us LONDON -- EMI Group PLC Wednesday confirmed it had received two recent approaches from Warner Music Group, both of which it had rejected, and had itself submitted a revised bid for Warner Music Group, which had also been turned down. After trading started on the London Stock Exchange, the U.K.'s EMI confirmed a newspaper report that Warner, based in New York, made its latest approach Tuesday, valuing the company at around £2.5 billion ($4.56 billion), or 320 pence a share. EMI said it rejected the bid, which followed an earlier bid made on June 14, at 315 pence a share. In late-morning trading Wednesday, EMI's shares were up 25.25 pence, or 8.9%, at 309 pence. Warner's move, first reported in the Financial Times, is the latest in a series of takeover proposals and counterproposals made by the two companies in recent weeks. EMI said in the statement it had made a revised proposal to Warner Music Group, to acquire all its outstanding shares for $31 in cash, on June 23. EMI and Warner have been in periodical discussions since 2000, when they backed out of an agreement to merge after it became clear that regulators would likely block the deal on antitrust grounds. EMI, which counts Robbie Williams, Coldplay and Norah Jones among its artists, kicked off the current round of negotiations on May 3, when it offered Warner Music $28.50 a share, in cash and shares, valuing the company at $4.2 billion. Warner Music, whose shareholders include Chairman Edgar Bronfman Jr. and private-equity groups Thomas H. Lee & Partners, Bain Capital Inc. and Providence Equity, turned the approach down. Analysts have for some time seen a tie-up between EMI and Warner, whose artist roster features Madonna and Green Day, as desirable and inevitable. A combination would create a music group with a 25.5% market share, making it the world's second-largest music company after Universal Music Group, a unit of Vivendi, according to data from the International Federation of the Phonographic Industry. Numis Securities said in a research note Wednesday: "We have long been of the view that a merger between EMI and Warner would add very significant value," pointing to the estimated £160 million in cost savings the deal would create, and the enhanced scale. Numis rates EMI hold. Analysts at UBS, however, believe the cost synergies realized by a deal would be closer to £100 million. UBS has a neutral recommendation on EMI. Numis drew attention to possible barriers to the deal, which include the financial structure, management conflicts and possible antitrust issues. EMI, which has net debt of £879.5 million, has said it would finance the deal from a combination of debt and a rights issue. Two major investors told Dow Jones at the time of the first approach they backed a rights issue to finance a deal. Press reports have claimed that both EMI's chairman, Eric Nicoli, and Warner Music chairman Bronfman, want to run the company. It is also unclear whether European Union competition authorities would allow the deal. The EU hasn't commented on whether it would allow EMI and Warner to merge since the renewed talks began, but in 2004 its competition regulator allowed Sony Corp. and Bertelsmann A.G. to combine their music units. UBS said in a research note Wednesday it believes there is upside to the EMI share price, with a fair value target of 270 pence. ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Internet: antunes at uh dot edu University of Houston Houston, TX 77204-3011 Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
