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Will financier Guy finally get his hands on music giant EMI?
(The Birmingham Post Via Thomson Dialog NewsEdge) Financier Guy Hands came a step closer to landing music group EMI yesterday after US company Warner Music ruled out a bid.
Mr Hands' private equity firm Terra Firma launched a recommended pounds 2.4 billion offer for the group in May, but has so far received support from fewer than four per cent of shareholders amid anticipation of a counter offer from Warner.
Warner, home to artists including the Red Hot Chili Peppers and James Blunt, confirmed 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 265 pence-per-share Terra Firma offer, which it considers "fair and reasonable". Shareholders have until lunchtime today 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 of today 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.
Mr Fifield said yesterday that he would also not be making an offer for EMI.
He said he had been reviewing an all-cash move for the group in conjunction with an number of ex-EMI executives, but due to timing constraints he would not be able to finalise a bid by the deadline.
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 pounds 200 million.
It 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.
Timeline
Music group EMI looked set to be sold to private equity group Terra Firma after two potential suitors said they would not make counterbids.
Warner Music Group and former EMI Music chief executive Jim Fifield said respectively that they would not be making a higher offer.
The following is a chronology of EMI and its many bid approaches.
2000 - EMI and Warner abandon their initial merger plans in the face of mounting opposition from European regulators. The two say they will continue to examine alternative deals acceptable to the regulators but the talks come to nothing.
2001 - EMI and Bertelsmann call off merger talks due to the same regulatory uncertainties after six months of talking.
2003 - Media reports suggest private equity group Blackstone is considering a bid for the group but it is never confirmed.
Late 2003 - EMI loses out in auction of AOL Time Warner's music business, which goes to a group of private equity firms led by former Hollywood mogul Edgar Bronfman Jr, Warner's current chief executive.
July 27, 2006 - EMI and Warner abandon efforts to buy each other, following a European court ruling on the Sony-BMG deal that casts doubt on whether competition regulators would allow further consolidation in the industry. Warner had offered 320 pence a share for EMI.
Dec. 14, 2006 - EMI rejects a pounds 2.5 billion approach from private equity group Permira.
Jan. 12, 2007 - EMI issues profit warning, axes EMI Music chairman and chief executive Alain Levy and EMI Music vice chairman David Munns.
Feb. 14, 2007 - EMI cuts the revenue forecast for its recorded music division, blaming weak US sales, and warns it will miss annual profit forecasts.
Feb. 20, 2007 - Warner approaches EMI, saying it sees strategic, commercial and financial logic in a deal. It secures backing of Impala, the trade group for independent music labels that previously challenged consolidation in the industry.
March 2, 2007 - EMI rejects pounds 2.1 billion cash takeover proposal from Warner Music, saying price is inadequate and not in the best interests of its shareholders.
May 4, 2007 - EMI says it has received a number of takeover approaches.
May 21, 2007 - EMI says it has agreed to a pounds 2.4 billion cash takeover from private equity group Terra Firma, or pounds 3.2 billion including debt.
June 11, 2007 - Warner says it is still considering an offer for EMI and any offer would be pre-conditional on appropriate anti-trust clearances being obtained.
July 17, 2007 - Warner says it has decided not to make an offer for EMI.
July 18, 2007 - Former EMI Music chief executive Jim Fifield says he had been working with a group of former EMI executives about making a bid but has pulled out due to a lack of time.
Copyright 2007 Birmingham Post & Mail Ltd , Source: The Financial Times Limited
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