WMG Stock Upgrade Reignites EMI Merger Rumor

Merger Minded?

CITI INVESTMENT RESEARCH analyst JASON B. BAZINET's upgrade of WARNER MUSIC GROUP is good news for the music and entertainment company. BAZINET wrote WMG has a "lot more breathing room," because it has tapped capital markets for permanent financing.

THE ASSOCIATED PRESS reports WMG "looks to be in a much stronger position to pursue mergers and acquisitions," leading to the ongoing rumors of a merger deal with EMI to gain more traction.

"It's still hard for us reconcile WARNER's relatively stable (revenue) with the widespread carnage across the music industry," BAZINET wrote in a note to investors. "Of course, WARNER's share gains go a long way to explain the discrepancy. But, share gains in music can prove fleeting. And those reversals can wreak havoc on equity values."

BAZINET wrote that WARNER CEO EDGAR BRONFMAN JR. is moving to LONDON, about a mile away from EMI's headquarters. BRONFMAN, nonetheless has continued to deny interest in acquiring EMI.

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