What Will CitiGroup Do With EMI?
February 2, 2011 at 4:15 AM (PT)
CITIGROUP finally seized control of EMI from GUY HANDS YESTERDAY (NET NEWS 2/1), acquiring 100% of the share capital on a restructuring that saw the company's debt load cut to £1.2 billion from £3.4 billion. The expected move followed years of financial issues following HANDS' £4 billion buyout of EMI in 2007 through his private equity firm TERRA FIRMA, financed with by CITIGROUP.
The question now is -- what will CITIGROUP do with EMI?
BLOOMBERG NEWS reports EMI, "taken private for $6 billion by GUY HANDS’s TERRA FIRMA CAPITAL PARTNERS in 2007, may sell for 12 to 14 times earnings before interest, taxes and depreciation and amortization, referred to as EBITDA, LAURA MARTIN, an analyst at NEEDHAM in PASADENA, CA, said in an interview."
MARTIN also told BLOOMBERG she foresaw, "a reorganization of the music industry that may involve WARNER MUSIC GROUP CORP. Private equity firms KKR & Co. and APOLLO GROUP INC., as well as SONY/ATV MUSIC PUBLISHING, are likely to seek EMI’s publishing unit. We see this as healthy for the global music industry. Revenue continues to shrink and the music industry must restructure and reorganize to survive."
On JANUARY 21st (NET NEWS 1/21) WARNER MUSIC GROUP hired the investment bank GOLDMAN SACHS to seek out potential buyers for the company, a process that will play out while WARNER continues to explore buying EMI, which many analysts expect to happen.
Regarding a purchase by WARNER MUSIC GROUP, FOX ROTHSCHILD entertainment attorney LORI LANDEW told FORBES. "WMG has an obligation to its shareholders to explore all alternatives, including a possible sale of assets. However, I do not believe that WMG is seriously putting itself on the block at this time."
LANDEW does see BERTELSMANN making a move on publishing assets, saying the GERMAN conglomerate is, "back in the picture but focused primarily on the music publishing end of the business, which has always been among the more stable aspects of the business. EMI's publishing unit is among the best and would be a jewel in any music publishing crown."
"It’s possible that WARNER could sell its WARNER/CHAPPELL PUBLISHING catalog -- which may now itself be worth nearly as much as the $2.6 billion BRONFMAN paid for the entire WARNER MUSIC GROUP in 2005," wrote ZACK O'MALLEY GREENBURG in FORBES, "and put the proceeds toward a purchase of EMI. Since a deal involving two of the world's four largest record companies could face regulatory hurdles, selling the catalog might even make regulators more comfortable with a merger."