Citi fires gun on sale of EMI
ICONIC music group EMI was put on the block by its owner Citigroup yesterday to drum interest in a sale that could net the bank more than £3bn.
EMI, home to artists such as Coldplay, the Beatles and Lily Allen, said it had started a process to “explore and evaluate” options including a sale or initial public offering.
The announcement follows months of speculation over the future of the 80-year-old music publisher after Citi, its creditor bank, wrestled control of it from Guy Hands’ private equity firm Terra Firma in a deeply acrimonious dispute last November.
It also comes hot on the heels of the sale $3.3bn (£2bn) of Warner Music, EMI’s US rival, to billionaire Len Blavatnik in an auction that attracted more than 70 interested bidders.
Warner’s sale leaves Citi with a number of bidders “still warm”, a music industry source told City A.M. – and gives Blavatnik the chance to combine EMI and Warner in a merger that has been considered a no-brainer since 2000.
Warner and Blavatnik are “without question” interested in a merger of the two brands, the source said. “He will be able to pay the most for EMI, because of the millions of dollars of synergies you can make between the two,” they added.
In the announcement, EMI said it had “initiated a process to explore and evaluate potential strategic alternatives, including a possible sale, recapitalisation or initial public offering of the company”.
The news follows reports that Citi had been canvassing potential buyers for the world’s fourth-biggest record label over recent weeks.
EMI has been profitable despite huge debts and generated £330m in earnings before interest, taxes, depreciation and amortisation in the year to March 2010, giving it a price tag of £2.6bn on a multiple of eight times earnings.
But Citi may look to sell EMI for closer to ten times its earnings – placing its price at £3.3bn or more.
Sources close to EMI played down the announcement, saying it was yet to send out the information memoranda for interested bidders.
An IPO is already viewed as highly doubtful, while a private equity buyer is seen as unlikely after Terra Firma’s disastrous ownership, which saw EMI saddled with £3.4bn of debt supplied by Citi until the bank declared it unsustainable.
But one banking source said the announcement seemed “bizarre” and suggested Citi may not have received the bid interest or price it was looking for in its discussions to date.