EMI and Warner Music 'to hold merger talks'

Senior executives at record label EMI and US rival Warner Music were said today to be preparing for preliminary talks over a £4bn-plus merger.

The companies have courted each other on a number of occasions in the past, but the Sunday Times reported that advisers on both sides are being briefed to prepare for fresh talks.

EMI, which this week put investors on stand-by for a 12% hike in annual profits, is understood to have lined up Citigroup and UBS to assist it.

A combination with Warner Music would create the world’s third largest music company behind Universal Music and Sony BMG, bringing together artists such as Coldplay and Robbie Williams with Eminem and Madonna.

It has long been expected in the industry and EMI failed to land its rival with a £1bn bid at the end of 2003.

The business was eventually sold by its owner Time Warner to a private equity consortium led by Edgar Bronfman Jr, the former chief executive of Seagram.

Regulators are also expected to look more favourably at a deal because of the changing nature of the music industry, including the growth of digital downloads.

The report stated that no approach has yet been made, but both sides were working through the potential structure of any deal. This includes resolving the management line-up, with EMI chairman Eric Nicoli and Mr Bronfman likely to want senior roles.

A spokesman for EMI declined to comment on the report today which also suggested that Apple could be interested in a bid for the UK company after the success of its iTunes download service and iPod music players.

EMI is worth £2.2bn currently while Warner Music is valued at $3.6bn on the New York Stock Exchange.

In addition to forecasting higher profits, EMI said last week that revenues would be up 4% in the year to March 31 after digital music sales soared.

EMI said both its record label and publishing arm, which sells music rights to film and television makers, outperformed the global industry last year.

For the corresponding period last year, EMI banked pre-tax profits of £141.1m on the back of £2bn of revenues.