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Might Warner and KKR mount joint bid for EMI?
By CMU Editorial | Published on Monday 15 March 2010
It’s taken as a given that Warner Music would like to acquire EMI if it falls onto the market, either because current owners Terra Firma decide to cut their losses and instigate a quick sale, or because the equity firm defaults on its loan agreements with Citigroup and the bank seizes ownership of the music major.
It’s also widely assumed that regulatory problems that might have stopped a Warner EMI merger five years ago – over concerns there being just three major record companies would be bad for competition – would prove less problematic now, given the declining dominance of the record industry in the wider music business, and the arrival of a combined Live Nation/Ticketmaster and the influence of the likes of Apple in the music sector.
But could Warner Music afford to buy EMI? Well, the rumour this weekend was that Warner are in talks with private equity house KKR about mounting a joint bid for the London-based major. If successful, Warner would absorb EMI’s recordings catalogue, while KKR would take EMI Music Publishing.
The equity firm is known to be eager to expand its music publishing interests, and has already bought into BMG Rights Management. It’s not clear if the EMI Publishing catalogue would be merged with BMG (such a deal has already been mooted), or whether KKR would keep the EMI publisher as a separate company.
Of course, it’s EMI Music Publishing that most people would want to buy, it being rather successful, while EMI Music – the recorded music company – makes all the losses. Which might make you wonder why Warner would want that bit of EMI without the publishing assets. Though the major probably believes that economies of scale may overcome most of the losses, while certain key EMI Music assets – the Beatles catalogue in particular – and the actually-doing-quite-well EMI Music Services business, are probably worth having. Plus, despite what I just said about the competition authorities, a merger of market-leading EMI Publishing with the Warner Chappell publishing firm might just cause some regulatory concerns.
Whatever, according to reports Warner and KKR have been busy discussing a joint bid since the shock departure of EMI Music chief Elio Leoni-Sceti last week, an exit that left many – well, us at least – concluding that Terra Firma now want well and truly out of the music business.
