Tuesday 15 November 2011, 11:43 | By CMU Editorial
Roger Faxon’s memo to staff about the EMI sale
Sent by EMI chief Roger Faxon to his staff following confirmation the company would be split for sale…
Following my note to you all earlier regarding the sale of EMI Music to Universal Music Group, I am now able to share with you the related news regarding EMI Music Publishing, which is to be sold to a consortium led by Sony. The press release is attached for you here.
Like Universal with EMI Music, Sony and their fellow investors saw an incredible business in EMI Music Publishing, one that represents probably the single greatest collection of songs and songwriters ever assembled. Their willingness to step up to Citi’s valuation of the business won the day.
Also like Universal, Sony will need to clear the necessary regulatory hurdles before they can take ownership of EMI Music Publishing. And until that regulatory process is complete, as I said earlier today, EMI will continue to look much as it does today, possibly past the end of our fiscal year. That means continuing to operate our business to the very best of our abilities, and fighting constantly to provide the best possible outcomes for our artists and our writers. That is what they deserve, and that is what we’re going to give them, no matter what.
I have attached to this note a set of Q&As that will at least address some of the questions you may have, regardless of whether you are in EMI Music or EMI Music Publishing. Over the next few days and weeks Leo and I will try to visit with as many of you as we can to answer your questions and concerns. And for those who we don’t get to see personally we will be sure to update you by email. You should also feel free to email me with any questions that you don’t get a chance to ask in person.
As I mentioned before, over the next months, each and every one of us will have an important part to play in cementing the legacy of EMI through our actions. We have created a new way of doing things, predicated on passion, humanity and integrity. And regardless of the nature of our ownership, I believe that all of us will continue to hold that important to us as we move forward.
The Q&A Briefing
1. What specifically needs to be done before the businesses actually change ownership? And, who will be involved in that work?
Amongst the work streams which need to come together to actually transfer ownership of the two businesses there are three of particular note:
First we need to achieve legal separation of the two businesses. That work is already well under way. A team led by Jade Moore has been appointed to implement the steps that need to be taken. She will coordinate with the finance directors and business affairs attorneys in each country. However there will need to be action by the boards of a number of companies to make this all come together. And, of course our central tax team will be intimately involved in this as well.
Second each of the buyers will be making application to the anti-trust regulators for clearance to complete their deal. Our responsibility will be to provide the buyers and regulators with the information they will need for those applications and any subsequent inquiries. Depending on the needs of the regulators, this is likely to involve a substantial effort on our part. As you can imagine the brunt of the effort will fall to the finance and legal and business affairs staffs. Overall this will be coordinated by Ruth and me. We will look to Kyla and Shane for RM and Clark and Claudia for MP to develop the information and respond to the inquiries.
On the MP side we have also agreed to help Sony with their plan to issue bonds as a part of the acquisition financing. This will involve providing them with a substantial amount of financial and operational information and it may require the separated MP company to provide audited accounts going back several years. So, once again the burden will largely fall to the finance teams.
2. Do both businesses need to complete at the same time? And, what happens if one completes before the other?
One of the two businesses may complete before the other. If it does it will be able to close at that time and not wait.
If there are any shared services between the two companies there will be a short period to allow them to wind down after the first business completes. Any further ongoing relationship will be determined by the two new owners.
3. How long will it take before each business will change ownership?
Given all that needs to be done it is likely that the process for both businesses will extend into the new fiscal year.
As the two deals will be examined separately, there is no certainty regarding which will complete first.
4. From now to completion will the way we run the company change? What limitations, if any, will we have on doing deals? Is there to be any change in delegated authorities?
Basically the business will be run in the same way we have been running it. We will continue to do deals, invest in our artists and songwriters, release and market our records, enter into licenses, etc – all of this independently from the buyers.
There will be some minor tweaks to the delegated authorities and our deal review procedures, but nothing substantial. Any specific changes to the delegated authorities and deal process will be communicated to those affected shortly.
5. What plans do each of the buyers have for each business?
The best way to understand their plans to read their comments in the press release announcing the sales. Beyond that the anti trust process imposes restrictions on what the buyer can say and do until they have received clearance.
This also means that the buyer is not allowed to give direction to the company and we are not to take direction.
6. Will we be required to interact with the buyer to plan for integration?
At some point, but not for some months. It is likely that the buyers for each of the businesses will want us to help them plan the integration of our business into theirs following completion. Again the anti-trust rules are very strict about how those consultations are to take place and the subjects they can cover. For that reason very few of us will be involved in this sort of work.
7. What can we discuss with the buyer?
We currently deal with both of these buyers as trading partners or competitors. And that is the way we will act up to the point of completion. Think about it this way nothing will change until they actually own the business and that cannot take place until the regulatory reviews are complete. So, if you swore at them before you can still do it, though I am not recommending that! If they were your friends they are still your friends. In other words interact with them just as you always have done.
What you cannot do is to share confidential information with them or take instructions from them. We run our show until completion.
Because this is such a delicate area we will be rolling out guidelines to ensure, as the anti-trust lawyers put it we don’t “jump the gun” during the transition period. Truly there are some very serious consequences for EMI if we screw this up.
8. Are there going to be layoffs?
During this transition period it is business as usual for us. That means we will continue to implement our current plans and drive the performance of the business. However, to be very clear we are not planning any transaction-related layoffs, in anticipation of the completion.