marc_vivien
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The protracted auction of EMI Group neared a conclusion Friday, with Citigroup Inc., owner of the storied British music company, selecting buyers for its publishing arm and recorded-music label—at a price that well exceeds many industry watchers' expectations.
Barring a last-minute hitch, EMI's recorded-music unit will be sold to Vivendi SA's Universal Music Group for $1.9 billion, while a group spearheaded by Sony Corp.'s music division will buy the publishing operation for $2.2 billion, according to a person familiar with the matter.
The deal, valued at $4.1 billion in total, could be announced later Friday, but the bank may wait until the weekend, the person said.
The now-likely outcome of the auction is a surprise on many levels. Neither Universal nor Sony had been tipped as likely winners in the months of frenzied speculation since Citigroup officially put EMI up for sale in June. Rather, a partnership between private-equity firm KKR and Germany media group Bertelsmann AG was long reported to be the frontrunner for EMI Music Publishing, while Warner Music Group was expected to consolidate the recorded arm.
And though Citigroup had been asking $4 billion for the businesses in total, most analysts thought it would likely have to settle for less, given the challenged state of the credit markets and the music industry itself, which is being buffeted by new forms of distribution and piracy.
There is still a chance that one of the rivals could come back with a knockout offer before the deals are announced, but that the odds of that now appear slim. Still, agreements with the two parties will need to get over regulatory hurdles which could be particularly formidable on the recorded side. Vivendi expects to have to sell some €500 million ($682 million) of Universal Music's assets as part of the deal, likely in part to placate its own shareholders. Regulatory approval could take 10 to 20 months.
In a sign of confidence that it can get the deal past antitrust authorities, Vivendi is taking on the regulatory risk, according to another person familiar with the matter. That means that should regulators block it, Vivendi would need to find another buyer for the business, and absorb any loss in the process.
The price tag for recorded music includes roughly $400 million of liabilities.
One of the key issues in the negotiations was the liability associated with 22,000 EMI pensioners. Universal steadfastly refused to take on the obligation, which it valued at upwards of £400 million. The breakthrough in negotiations between Citigroup and Universal came last week when the bank indicated a willingness to keep the liability, which it will do, according to one of the people. Citigroup values it at closer to £150 million.
Citigroup has owned EMI since February, when it seized the company from former owner Terra Firma Capital, and slashed the value of what it was owed to £1.2 billion from £3.4 billion. The private-equity firm, which bought EMI in 2007, was close to a default on the massive debts it took on as part of that purchase. Citigroup was left as EMI's sole lender when it couldn't syndicate debt it extended as part of the Terra Firma deal in the early days of the credit crisis.
http://online.wsj.com/article/SB100...0429400.html?mod=WSJEurope_hpp_LEFTTopStories
Barring a last-minute hitch, EMI's recorded-music unit will be sold to Vivendi SA's Universal Music Group for $1.9 billion, while a group spearheaded by Sony Corp.'s music division will buy the publishing operation for $2.2 billion, according to a person familiar with the matter.
The deal, valued at $4.1 billion in total, could be announced later Friday, but the bank may wait until the weekend, the person said.
The now-likely outcome of the auction is a surprise on many levels. Neither Universal nor Sony had been tipped as likely winners in the months of frenzied speculation since Citigroup officially put EMI up for sale in June. Rather, a partnership between private-equity firm KKR and Germany media group Bertelsmann AG was long reported to be the frontrunner for EMI Music Publishing, while Warner Music Group was expected to consolidate the recorded arm.
And though Citigroup had been asking $4 billion for the businesses in total, most analysts thought it would likely have to settle for less, given the challenged state of the credit markets and the music industry itself, which is being buffeted by new forms of distribution and piracy.
There is still a chance that one of the rivals could come back with a knockout offer before the deals are announced, but that the odds of that now appear slim. Still, agreements with the two parties will need to get over regulatory hurdles which could be particularly formidable on the recorded side. Vivendi expects to have to sell some €500 million ($682 million) of Universal Music's assets as part of the deal, likely in part to placate its own shareholders. Regulatory approval could take 10 to 20 months.
In a sign of confidence that it can get the deal past antitrust authorities, Vivendi is taking on the regulatory risk, according to another person familiar with the matter. That means that should regulators block it, Vivendi would need to find another buyer for the business, and absorb any loss in the process.
The price tag for recorded music includes roughly $400 million of liabilities.
One of the key issues in the negotiations was the liability associated with 22,000 EMI pensioners. Universal steadfastly refused to take on the obligation, which it valued at upwards of £400 million. The breakthrough in negotiations between Citigroup and Universal came last week when the bank indicated a willingness to keep the liability, which it will do, according to one of the people. Citigroup values it at closer to £150 million.
Citigroup has owned EMI since February, when it seized the company from former owner Terra Firma Capital, and slashed the value of what it was owed to £1.2 billion from £3.4 billion. The private-equity firm, which bought EMI in 2007, was close to a default on the massive debts it took on as part of that purchase. Citigroup was left as EMI's sole lender when it couldn't syndicate debt it extended as part of the Terra Firma deal in the early days of the credit crisis.
http://online.wsj.com/article/SB100...0429400.html?mod=WSJEurope_hpp_LEFTTopStories
