PE and strategic bidders are going to clamor for EMI Music Publishing and other coveted music rights assets following the $3.3 billion deal that marked a win for Warner Music’s PE backers. The question is, how soon will they get a chance?
One dealmaker in the space suggested Citi would begin preparing EMI for sale immediately, based on the Warner Music bidding. EMI Music Publishing has, in fact, been shining itself up ever since Citi snatched it away from Guy Hands’ bumbling hands. Under Citi’s ownership, EMI assumed responsibility of digital rights it previously allowed the American Society of Composers, Authors and Publishers to manage so EMI, instead, can control licensing rights to streaming and cloud-based services. Private equity may be here to stay; companies dependent on online music (Google, Apple) will want to maintain their relationships with their new partners in the space.
Citi, which took control of EMI earlier this year after private equity firm Terra Firma defaulted on a $5 billion loan, wouldn’t comment for this story. Billionaire Len Blavatnik is expected to be one bidder for EMI’s rights catalog, which would be especially complementary to his latest purchase–Warner Music. But Blavatnik will have to muscle off other buyers, including a KKR-Bertelsmann JV BMG Rights Management or Sony/ATV Music.
Of course, EMI might not necessarily go to Blavatnik, or the BMG, or to Sony. Financial sponsors are stalking the music industry for coveted rights very similar to what EMI snatched from ASCAP once under Citi’s flag. Tom and Alec Gores’ Platinum Equity and Gores Group PE shops (respectively, or together) and Guggenheim Partners could show up at EMI’s sale if it’s anything like Warner’s, and individual bidders like Ron Burkle may yet wind up in the mix. Each of them would be eager to replicate results shops like TH Lee had investing in Warner Music; its investment, in which it was joined by Bain, Providence and the company’s CEO Edward Bronfman, is said to have made the PE investor double its money.
If Blavatnik again scores the winning bid, there may still lay opportunities ahead for financial sponsors in music rights.
That hinges on the ongoing saga of the Michael Jackson estate dissolution, which puts into play his 50% stake in lucrative rights catalog and aforementioned would-be bidder Sony/ATV Music. The rights manager launched multiple bids at Warner Music with financial partners and is expected to compete for EMI. That asset—within which are a catalog of Beatles tunes the King of Pop snapped up from Yoko Ono and Paul McCartney at what proved to be a mega-discount, and reportedly, the former Mrs. Lennon’s behest—will likely carry a hefty premium as the rights manager grows; Jackson’s stake is expected to be worth hundreds of millions. The original kings of pop, it turns out, will not enjoy as much of a profit as Jackson.