Well, this is an interesting turn of events. According to the Financial Times, Warner Music pulled out of the bidding for the EMI record companies late last week, which is interesting because the company was pretty much the last man standing with an interest in the London major’s recordings business.
According to the FT, Warner Music owner Access Industries withdrew its offer because it couldn’t agree on a price with EMI’s current owner Citigroup, despite the Warner Music parent company reportedly offering up to $1.6 billion, somewhat more than analysts ever expected the EMI labels to raise. Crucially, it’s thought that neither the other two serious bidders for the EMI labels, Ron Perelman’s MacAndrews & Forbes and the Universal Music Group, were willing to go that high.
As previously reported, insiders said that the main stumbling block in talks between Access Industries and Citigroup last week was EMI’s pension liabilities, though it’s not clear whether that was directly responsible for the Warner party’s decision to exit takeover talks on Friday.
Citigroup’s separate negotiations regarding the sale of the EMI music publishing company are seemingly going better, with both BMG and Sony/ATV still in the running. It will be interesting to see what happens if a deal is done regards the sale of the EMI publishing business now, but no deal over the labels can be concluded. Does Citigroup hang on to the labels for the time being and try again in early 2012, possibly when the credit markets have improved allowing more players to bid? Though, arguably, on their own the sound recording catalogues will only really be of interest to another big record company, and the two obvious buyers in that domain both bailed last week.
Of course Universal, which reportedly withdrew from the bidding when it became clear it couldn’t compete with Warner on price, may now return to the table. And it’s always possible that Access Industries’ dramatic withdrawal is actually a negotiating tactic to force Citigroup’s hand.
Either way, Citigroup’s bid to sell on EMI is proving just as eventful as the rest of the major’s recent history, since Terra Firma’s audacious and ultimately doomed takeover in 2007.