June 28, 2006 EMI Raises Bid for Warner and Rejects Counteroffer By HEATHER TIMMONS and JEREMY W. PETERS NY Times
http://www.nytimes.com/2006/06/28/business/media/28cnd-music.html?_r=1&oref=slogin&pagewanted=print LONDON, June 26 Someday, EMI Group and Warner Music Group are going to pair up, most music industry experts predict. What no one can figure out is exactly when or who will own whom if they finally do. Those were some of the questions that arose today, after EMI said it had increased its bid for Warner to $4.6 billion, from $4.2 billion in May, and also said Warner had turned the tables and bid about $4.6 billion for EMI on Tuesday. Neither company is welcoming the other's bid. EMI said today that Warner's proposal is "wholly unacceptable." Warner issued a statement today calling its offer "value enhancing to EMI shareholders." But if the companies do join forces, the end product would be one of the largest music libraries in history. Warner, based in New York, is the world's fourth-biggest music company, and EMI, based in London, is the third-largest. The two companies, the only major music labels that are not part of a larger media conglomerate, have tried to negotiate a deal for several years, and even agreed in 2000, only to have it killed by regulators. This round of talks has been live since the beginning of May, when EMI first made a $28.50-a-share offer for Warner. EMI is now offering $31 a share in cash for Warner. EMI's artists include Norah Jones, Coldplay and Radiohead. Music industry analysts feel the 75-year-old company would be a good match for Warner, which includes Sean "P. Diddy" Combs's label, Bad Boy Records, as well as artists from Madonna to Green Day. Combined, the two companies would have about 25 percent of global music sales, just slightly less than Universal, and ahead of Sony BMG, according to figures from the International Federation of the Phonographic Industry, a London-based trade group. Analysts estimate there are several hundred million dollars in costs that could saved if the groups combined. What they two companies cannot seem to figure out is how to get together. "It's a bit of a staring match, isn't it?," said Patrick Wellington, an analyst with Morgan Stanley in London. "EMI seems absolutely determined that they should be in charge of each deal. They don't want a merger because they think they're doing a good job, and that they're the best music managers around." The negotiations pit EMI's chairman, Eric Nicoli, against Edgar Bronfman Jr., the executive who spoiled Mr. Nicoli's last attempt to buy Warner Music by amassing a team of private equity players to buy the unit himself in 2003 from Time Warner. Mr. Bronfman's financial backers include Thomas H. Lee Partners and Bain Capital. There have been several back and forth bids in this go-round. On June 14, five weeks after EMI bid for Warner, Warner approached EMI with a bid valued at 315 pence ($5.77) a share in cash, EMI said today. Then Tuesday night, Warner increased that offer to 320 pence ($5.82) a share. EMI jumped 23.75 pence, or 8.4 percent, to 307.50 pence today in London trading. On the New York Stock Exchange this afternoon, Warner Music was trading up $1.06, or 3.9 percent, to $28.29. EMI said today that its improved bid would be paid entirely in cash, and that the money would be raised by a stock sale, debt and selling off some music publishing assets. Noting that Warner's most recent offer was essentially the same offer that EMI put on the table, Mr. Wellington said he thought EMI would end up purchasing Warner, not the other way around. If Warner were more serious about bidding for EMI, Mr. Wellington added, they would have sweetened their deal more. "I think the more likely deal is EMI for Warner," he said. Because a combination of the two companies would create one of the world's largest music libraries, analysts said part of the delay in completing a deal might be placing a value on what each company owns. "A lot of the valuation is being based on the library, and that's very hard to value when the profitability of music is becoming less and less per song," said Ivan Feinseth, director of research with Matrix USA. ================================================= 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]
