The auctioneer’s gavel is about to fall on EMI Group Ltd.
After three months of running-by-default the fourth largest music company, Citigroup will begin in earnest this month to escape its nearly $7-billion misadventure, a senior official of the colossal bank has told The Wrap.
With EMI valued at no less than $2.5 billion, according to one prospective bidder, at least a half dozen billionaires, buyout firms and rival music labels are said to be poised to vie for the music major.
Citing Citigroup as his source, the prospective bidder said the bank is nearing the final stages of producing the offering papers. The document is likely to include a financial snapshot of the three months since Citigroup seized EMI on Feb. 1 after a loan default by Terra Firma, the investment firm of now-tarnished British private equity boss Guy Hands.
In the meantime, the giant bank, whose EMI spokesperson declined comment, has found itself in the unlikely business of recording the likes of Katy Perry (below), Lady Antebellum and Coldplay as a result of lending into one of the media industry’s more ill-fated recent deals and continuing saga.
Despite lagging behind, Universal Music Group, Sony Music Entertainment and Warner Music Group, “lots of folks are interested,” the senior Citigroup insider told The Wrap.
Speaking of prospective bidders, the bank official added, “we’ve been letting the troops line up.”
Still not known is whether Citigroup will entertain offers for all or part of EMI Group. It operates through EMI Music (recording labels include Capitol Records and Virgin) and EMI Music Publishing, the world’s largest music publisher. Published reports suggest EMI’s CEO, Roger Faxon, has been advocating against dismembering the company to sell its parts.
One senior major-label executive values the publishing arm at $1.5 billion and the music labels at $1 billion. The senior Citigroup insider suggested that the bidding will begin closer to the $3.3 billion fetched in early May for Warner Music Group by Russian-born global industrialist Len Blavatnik.
But there are some warning signs as a result of that deal. Though it instantly propelled Blavatnik to leading contender for EMI, it almost as quickly made him a target of Warner Music Group shareholders.
At least two filed class-action lawsuits -- not unusual when public companies go private -- to block the transaction. In effect, they argue, his winning bid resulted from insider connections that denied small Warner Music shareholders a richer bid.
The lawsuits, which claim billionaire brothers Tom and Alec Gores (left) had the higher offer, seek a do-over of the auction, among other things. What's more likely, though, is that the shareholders settle the matter, a typical outcome in such cases.
Yet, for Citigroup, EMI has been nothing but unsettling since it loaned some $5 billion to finance Guy Hands’ purchase of the music company in 2007, through his British private-equity giant, Terra Firma.
