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Speculation continues of imminent EMI sale
By CMU Editorial | Published on Monday 10 January 2011
It may be a new year, but this story isn’t going away. And while the more pessimistic of recent speculation that US bank Citigroup could take possession of London-based music major EMI before the end of 2010 didn’t come to pass, rumour is still rife that the bankers will be in charge at EMI HQ sooner rather than later.
As much previously reported, in order for EMI to meet the covenants of its multi-billion pound loan with Citigroup this spring, the music company will almost certainly need a hundred million plus cash injection from its owners Terra Firma, the equity group which landed the music firm with such a big bank debt in the first place, when it acquired the company back in 2007.
Terra Firma made a similar cash injection to keep EMI afloat last spring, but it was widely rumoured at the time that, while the equity firm’s top man Guy Hands remained committed to his big music acquisition, many of his financial backers were less keen.
Following last year’s court battle between Terra Firma and Citigroup over the EMI purchase, in which Hands unsuccessfully argued he’d been tricked into buying the music company by the bank, looking rather foolish in the process, gossipers say there is no way the equity chief will persuade his backers to put more cash into the music major this year.
That would mean EMI was in breach of its loan terms and Citigroup could seize ownership. Some City commentators are now saying that turn of events is so inevitable that Terra Firma is preparing to hand over the music major early, perhaps negotiating to keep a minority stake so that when the bank inevitably sells the music company it can recoup some of the billion odd pounds it has lost via its big EMI adventure.
Yesterday, The Observer cited a “well-placed City source” as saying Citigroup is likely to get control of EMI within six weeks. The source told the broadsheet “the endgame is fast approaching, Guy’s backers don’t want to put any more money into EMI, which means he has to cede control and admit defeat”.
There is new speculation too that Citigroup is in talks with Warner Music and KKR, the equity group which owns half of BMG, about buying the constituent parts of EMI. The Observer report suggests that, as has been long assumed, Warner would take the EMI record company, for a mere £400 million, while KKR would buy the more lucrative EMI publishing business, for £1.1 billion, valuing the wider EMI Group at a rather disappointing £1.5 billion.
That said, while such a break up and said respective buyers have long been mooted, some commentators still question whether Warner could find £400 million at this time, even if it would enable its record company to grow to a size more equal to rivals Sony and Universal. And, of course, the boss of the KKR backed music rights company BMG, Hartwig Masuch, told Music Week last month he was more interested in the EMI record company that its publishing catalogues.
Either way, it seems the immediate future of EMI is more uncertain now than ever, the only positive for staffers there being that some sort of resolution regarding the firm’s ownership must surely come in the first half of this year.
Meanwhile, I’m sure the news that Hands received a £12 million dividend pay-out from Terra Firma last year will warm the hearts of the average EMIer. It was the first mega pay-out from the equity company to Hands for years, despite 2010 being another tricky twelve months for the firm, albeit arguably more in PR terms than anything else. To be fair, it’s thought that Hands has pumped much more of his personal fortune than that into EMI since the 2007 purchase, and that the twelve million he received last year was diverted straight into Mrs Hand’s hotel business to help it reduce its debts. So, no big tea party at the Hands’ Channel Islands home. Not even biscuits.
