The ongoing painful death of record label EMI continues apace – with a new twist. London’s Sunday Times reports that rival US label giant Warners and private equity company KKR are drawing up a plan to make a bid for EMI which is expected to come up for sale this northern Summer. KKR has its beady eyes on EMI’s publishing arm, while Warners has been coveting the recorded music division – home to Pink Floyd, Coldplay and Robbie Williams among many others.
EMI Music Publishing is valued at about £1.2 billion (AU$2 billion), while no-one knows what to value the recorded music divison at. The general consensus is that Terra Firma, the private equity form that has bought one of the biggest music lemons in history, paid way too much for the company because its recorded music division was over valued. While it made 55 per cent of EMI’s normal earnings last year, it’s still fighting a losing battle against downloading and most of its artists are walking away from it the moment their contracts expire, like The Rolling Stones did.
Before any deal lands on the table through, EMI has a few issues to resolve. Firstly, its music boss, Elio Leoni-Sceti abruptly jumped ship last week, perhaps fully aware that said vessel was about to sink. Furthermore, Warner and KKR won’t be making any offers until EMI’s dispute with bankers Citigroup is resolved. EMI has to persuade investors who have found their investment haemorrhaging cash to stump up £120m to cure a covenant breach on its £3.2 billion of loans by June 14 or Citigroup will repossess it. In the meantime, it’s also suing Citigroup for allegedly misleading it over the value of the company when it bought it in 2007.
This, kids, is how not to run a business…
