Warner pull-out puts financier in EMI driving seat
Financier Guy Hands came a step closer to landing music group EMI today after US company Warner Music ruled out a bid for the firm.
Mr Hands’ private equity firm Terra Firma launched a recommended £2.4bn (€3.6bn) bid for the group in May, but has so far received support from fewer than 4% of shareholders amid anticipation of a counter offer from Warner.
Warner, home to artists including the Red Hot Chili Peppers and James Blunt, confirmed last night it had decided not to make an offer for the company, although reports have suggested that the group could now make a deal with Terra Firma for the company’s recorded music division.
EMI, which boasts Lily Allen and Robbie Williams among its portfolio, saw its shares fall on the news, following a strong performance over the last few months as investors geared up for a potential bid battle.
Panmure Gordon analyst Alex DeGroote said that in the absence of a counter offer, he now expected a deal with Terra Firma to go through.
EMI said it had noted Warner’s decision, adding that it continued to “unanimously recommend” the Terra Firma offer, which it considers “fair and reasonable”. Shareholders have until lunchtime tomorrow to back the bid.
Warner Music, also home to Madonna, said last month it was considering making a rival bid for EMI, while reports speculated that it was trying to team up with a private equity backer to help finance a deal.
EMI and Warner have been in on-off discussions regarding a takeover or merger since 2000 as both firms struggled to compete with the take-off in digital music downloads.
But regulatory clearance has been seen as a major hurdle to a merger between EMI and Warner after thwarting previous attempts to join forces.
The Terra Firma deal has already received regulatory clearance from the European Commission.
On Monday, takeover authorities issued a “put up or shut up” deadline to potential offerors, including former EMI chief executive Jim Fifield who said in May that he was still considering a bid for the company, despite a failed attempt to team up with private equity firm Corvus Capital earlier this year.
Warner has reserved the right to make an offer for EMI, should a third party now enter the fray.
Terra Firma was founded by Guy Hands in 2002. He and his wife Julia ranked 351 in the Sunday Times Rich List 2007 with an estimated wealth of £200 million.
He started his career at Goldman Sachs before leaving to establish the Principal Finance Group (PFG) at Japanese bank Nomura International, where he made his fortune with the purchase of a chain of UK pubs.
Terra Firma has extensive property assets and in 2004 bought up the UCI and Odeon cinema chains. It recently launched a bid for Alliance Boots but missed out to fellow private equity group Kohlberg Kravis Roberts and Stefano Pessina.
