With everyone now seemingly certain that Citigroup will take over control of EMI this spring – with the major’s current owners Terra Firma unable or, more to the point, unwilling to provide an extra cash boost to ensure the music firm meets the covenants of its mega-bucks loan with the US bank – the Wall Street Journal has moved on to writing lists of which buyers Citi execs might then sell the British music major on to.
Most we already knew about, with equity firm KKR, co-owners of the ever expansive BMG, and long time EMI suitor Warner Music, leading the list of potential buyers Citigroup has supposedly had contact with. It’s been mooted for sometime that the KKR-backed BMG might buy the EMI music publishing business, leaving the EMI record companies for Warner to snap up. Though there is still a chance BMG might bid for the labels instead, or that either buyer might go for the whole shebang.
Of course, there is the question as to whether Warner Music, without a cash rich parent company or backer, could afford to bid for EMI at all. Though, as previously reported, the company does have Goldman Sachs in the house as we speak reviewing all its options, leading to speculation it might sell off its publishing business Warner/Chappell to fund an acquisition of some or all of EMI.
KKR is also thought to be a potential bidder for Warner/Chappell, though the Telegraph reported this week that Sony’s publishing division Sony/ATV is also interested. Or it was late last year when, the broadsheet claims, it put in a call to Warner Music supremo Edgar Bronfman Jr to float the idea of him selling Warner/Chappell to them.
The Telegraph also claims that, having heard about that Sony/ATV call, Terra Firma boss Guy Hands then suggested to Edgar he use the money to buy the EMI record labels, Hands allegedly hoping a quick deal could be done to pre-empt Citigroup from taking control. Though for Terra Firma to sell the EMI labels to Warner would have needed Citigroup approval anyway.
Anyway, most of that is old news, who else is the WSJ tipping as possible EMI bidders if and when Citigroup take control and put it up for sale? Well, the other two music majors for starters – so Sony and Universal – though any attempts by them to buy EMI would surely interest competition regulators in the US and Europe which might make any sale slow, tedious and expensive (even a Warner deal might come with those strings attached, it certainly would have done five years ago).
Like the Mail last weekend, the WSJ also says that Citigroup has spoken to Terra Firma – despite the bitter legal battle the two firms were embroiled in late last year – about the it buying the company back, in a deal which would enable the equity group to keep EMI in its portfolio but with nearly half the debt burden; in that the £3 billion Citigroup debt would be written off, but Terra Firma would have to borrow another £1.8 billion from someone else to buy the music major back.
Quite where Hands would get the £1.8 billion from isn’t clear, though the WSJ claims he has spoken to Canadian pension fund CPP about them helping to finance the deal, it possibly being the Terra Firma-backing Canadian institution that was rumoured to have been most supportive when Hands last needed to raise cash to inject into EMI last year.
If that doesn’t work, one City source has told The Journal, Citigroup might even consider helping out by providing Hands with a brand new loan. Which would be brilliant. Citigroup seize EMI from Terra Firma because of an old bank loan gone bad, and then sell it to Terra Firma by providing it with a new bank loan. It seems unlikely, but it would be a crazy turn of events if it were to happen.
Talking of crazy rumours, The Journal’s last bit of EMI-related gossip is the suggestion that Simon Cowell’s Syco might bid. I have a feeling this is a rumour primarily created to inject a bit of celebrity in the proceedings, but the WSJ says that “people familiar with the matter” claim that the top guard at the Sony-backed Cowell-controlled music and telly firm have discussed the idea.
Even if that’s not true at all, perhaps Cowell could turn all of this into a reality TV show – EMI’s Got Talent – in which a public phone vote decides which gullible suitor gets to buy the London music firm. If the ‘Citi sells it back to Terra Firma’ thing is really an option, that would make quite good telly.