Warner Music, BMG/KKR in lead for EMI assets

Len Blavatnik’s Warner Music Group and KKR-backed BMG Music are in the lead to win the auction for the recording and music publishing assets of EMI Group from Citigroup Inc., Reuters reported Thursday. Blavatnik appeares close to clenching a $1.5 billion deal for EMI’s labels, which include Capitol and Virgin, two people told Reuters. Vivendi’s Universal Music Group, the world largest music company, reportedly dropped out of the running for EMI’s record label assets. Citigroup seized control of EMI in February after its previous private equity owner, Terra Firma, defaulted on a loan.

(Reuters) – Len Blavatnik’s Warner Music Group and KKR-backed BMG Music, look set to win the auction for the recording and music publishing assets of EMI Group from Citigroup Inc and a deal could be reached by the weekend, according to people familiar with the talks.

The bid by various owners to combine Warner Music and EMI has been on and off again for over 15 years. Blavatnik appeared close to clenching a $1.5 billion deal for EMI’s labels which include Capitol and Virgin on Thursday, two people said.

Vivendi’s Universal Music Group, the world largest music company, dropped out of the running for EMI’s record label assets, a source said on Thursday.

An EMI spokesman declined to comment. All bidding parties declined to comment.

EMI’s record labels, home to marquee names including the Beatles and Coldplay, have always been the glamorous end of the business. But the more interesting battle is for the song publishing catalog as Citi readies to break the company up to get the best price.

The bank seized control of EMI in February after its previous private equity owner, Terra Firma, defaulted on a loan.

Bids for the song catalogs of EMI Music have come in closer to Citi’s expectations but the early offers for its record labels had been underwhelming.

EMI Publishing’s catalog has over 1.3 million songs from iconic tunes like “New York, New York” to current hits like Adele’s ‘Rolling In The Deep”.

The publisher attracted bids over $2 billion from BMG Music Rights, a joint venture between private equity firm KKR and German media giant Bertelsmann and Sony/ATV Music Publishing, a partnership between Sony Corp and the estate of pop singer Michael Jackson.

Sony/ATV, with debt financing from UBS and equity from Abu Dhabi firm Mubdala and private equity firm Blackstone Group, is believed to have put in the highest bid for the publisher, according to two people close to the transaction. But these people said BMG’s bid was competitive, and was advantaged because of a simpler financing structure through KKR.

Sony/ATV’s bid has been hampered by bureacracy in dealing with the Sony board, allowing BMG to act more nimbly, the sources said.
(By Yinka Adegoke and Nadia Damouni)