Guy Hands’ battle to keep EMI appears to be over.
Citigroup seized the beleaguered EMI Group from Hands’ private equity firm, Terra Firma, on Tuesday, ending one of the entertainment industry’s most tarnished misadventures and likely striking the starting bell for an auction of the No. 4, but smallest, label-group among the shrinking record giants.
The U.S. bank took full ownership of EMI -- home to such acts as the Beatles, Coldplay and Katy Perry -- and immediately restructured its debt, wiping out 65 percent or £2.2 billion ($3.55 billion).
Read also: Guy Hands' $7B Acquisition of EMI Music Plays its Final Notes
EMI, which was carrying a debt of £3.4 billion ($5.48 billion), now owes £1.2 billion ($1.94 billion) -- and has £300 million ($483.7 million) of cash available, Citigroup said.
Hands and Terra Firma -- with the help of Citigroup -- bought EMI for £4.2 billion ($6.77 billion) in 2007.
EMI said it would "continue delivering on its strategy to maximize value for the artists and songwriters it is dedicated to serving.”
The deal effectively ends EMI's tumultuous era under Hands, one that saw two of its biggest acts -- the Rolling Stones and Paul McCartney -- walk away, and a revolving door of sorts operating in the executive suite.
Suitors have hovered around EMI for months -- and in the case of one, Warner Music Group -- for years. Warner, a public company controlled by a shareholder group lead by CEO Edgar Bronfman Jr., has hired Goldman Sachs to deal either a sale of Warner or a purchase of EMI.
At the same time, the industry’s No. 1 and No. 2 music-label groups, Universal Music Group and Sony Music Entertainment also are said to be interested in EMI assets. Similarly, KKR, the private equity giant, and partner BMG, the German media giant, are interested in the EMI Publishing.
Roger Faxon, EMI’s chief executive, called the recapitalization "an extremely positive step" for the company.
"It has given us one of the most robust balance sheets in the industry with a modest level of debt and substantial liquidity," Faxon said in a statement. "With that solid footing, we are confident in our ability to drive our business forward. We have already made great progress in meeting the challenges facing our industry. The closer alliance between our two operating divisions is already delivering impressive results on behalf of the creative talent we are privileged to represent. We have a clear vision for the future, a strong and committed management team, and now the right capital and financial structure in place to deliver successful outcomes for artists and songwriters.”
Here's the release that just went out in London:
EMI ANNOUNCES SUCCESSFUL CAPITAL RESTRUCTURING, AND CHANGE OF OWNERSHIP
Debt dramatically reduced; EMI now has the financial flexibility to invest in its strategy for growth
EMI Group Ltd (“EMI”), one of the world’s leading music companies, today announces that Citigroup (“Citi”) has acquired 100% of its share capital.
