EMI Holds New Talks for Rival
By ANDREW ROSS SORKIN and JEFF LEEDS

EMI, the world's third-largest music company, is in early talks to acquire a rival, the Warner Music Group, for more than $5 billion, people involved in the negotiations said yesterday.

The chairman of EMI, Eric Nicoli, made the offer early this week to Warner Music's chairman, Edgar Bronfman Jr., these people said. Mr. Nicoli suggested that EMI was willing to pay about $30 a share.

Mr. Bronfman pledged to take the offer back to Warner's board. Warner's shares closed yesterday at $27.29, up 29 cents.

The negotiations are the latest in a series of on-and-off talks between the companies that have unfolded over several years. EMI unsuccessfully bid to buy Warner from its previous parent, Time Warner, in late 2003 before losing out to an investment group led by Mr. Bronfman. Before that, European regulators blocked a proposed merger of the two giants.

An EMI spokeswoman said the company does not comment on speculation. A Warner spokesman declined to comment. People involved in the talks warned that they were in an early stage and could collapse.

Globally, EMI and Warner rank a distant third and fourth in sales behind Universal Music Group, a unit of Vivendi, and Sony BMG Music Entertainment, a venture of Sony and Bertelsmann.

Combining EMI and Warner would create a company with about 24.7 percent of the market, second behind Universal, which has 25.5 percent, according to data from the International Federation of the Phonographic Industry, the industry's international trade organization. Such a deal would shrink the field of major competitors to three companies of similar size.

The talks also underscore the uncertainty within the music industry, which may still need more consolidation and cost cuts to survive.

Record companies have been scrambling to secure footing in the digital market as they suffer a lengthy slump in CD sales, in part because of continuing piracy of music.

EMI has such acts as Coldplay and Norah Jones, with a large catalog of best-selling recordings by the Beatles and the Beach Boys. Adding Warner would bulk up the company's presence in the United States

Surely we must believe our industry BIBLE??!!

NEW YORK, May 3, 2006--Warner Music Group Corp. (NYSE: WMG) recently received a preliminary non-binding proposal from EMI Group Plc. The Warner Music Group Corp. board of directors has carefully evaluated the proposal in conjunction with the company's outside legal and financial advisors. The board has determined that the proposal is not in the best interests of our shareholders and has unanimously rejected it.

what's going on here? To Nichols, Bronfman & Co. really believe the downloads from iTunes and some other digital earnings justify these valuations?

And Bertelsmann is saying there are LOTS of interested parties in BMG Publishing / Sony BMG.

There are even rumours of UMG buying BMG Publishing.

nm

whispers can be louder than you think if you mix in the right circles.
Morning Roger!

About selling off publishing post-buyout...

Would Warner Chappel plus EMI publishing really be a bigger problem than WMG plus EMI per se?

I'd have thought the record company combo would be a bigger slab of recording, than the publishing combo would be of publishing... if you get my drift.

Because surely publishing needs far fewer staffing/overheads/office space etc than label and therefore even greater combination savings can be made by publishers.

I was thinking monopoly... but more that although Warner and EMI publishing together would be big, they wouldn't be as big (proportionally) as the recording combo.

What I'm thinking is there are more substantial 'indie' publishing catalogues, and some of EMI and WMG publishing isn't owned by them... but I don't know for sure.

But yes, looking at it from the EMI/WMG integration POV... publishing is where they would get big wins.

The EMI bid makes no sense. It's too expensive for EMI, and there's no premium for the WMG-investors

But what about WMG buying EMI?

At present EMI is valued 4 billion dollars, 20 per cent less than the WMG (it should be the other way round).

but I bet Eric bids that

what about the publishing?

I don't think the No.1 & 2 in the world will get the permission of the EU.

Record Company Swings to a Quarterly Loss
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
May 5, 2006 11:53 a.m.

Warner Music Group Corp. said it has been named in 14 class-action lawsuits related to the pricing of digital music downloads.

The recording company revealed Friday in its quarterly report with the Securities and Exchange Commission that the lawsuits follow governmental inquiries across the music industry related to the pricing of the downloads.

The investigators allege that some record companies conspired to fix prices for digital downloads. Warner Music Group has earlier said it received two subpoenas from Eliot Spitzer, the attorney general of New York, requesting information related to the investigation. In March, the company said it received a civil investigative demand from the U.S. Justice Department related to the same matter.

The announcement came as Warner Music released its fiscal second quarter results. The New York company reported a net loss of $7 million, or five cents a share, for the period, a reversal from a net income of $4 million posted in the year-earlier period. Revenue rose 4% to $796 million from $767 million.

Net income for the second quarter of 2005 included a $39 million unrealized gain on warrants issued to Time Warner Inc., its former parent. The warrants were repurchased in May 2005, when Warner Music went public.

The loss was attributable to a drop in revenue from music publishing, which offset a climb in sales of recorded music.

The company still managed to beat Wall Street estimates. Analysts polled by Thomson Financial were expecting a loss of 16 cents a share on revenue of $770.6 million.

Warner Music's revenue from its recorded-music business overall rose 9% to $676 million. Digital-recorded music accounted for 13% of the total and almost tripled from a year ago.

Music-publishing revenue declined 16% to $129 million. Digital revenue from music publishing accounted for 3% of the total.

Earlier this week, Warner said that rival EMI Group made a $4.2 billion acquisition approach but that its board unanimously rejected it. EMI's efforts may not be over as the two companies continue to consider a combination that many in the music industry see as all but inevitable. (See related article.)

On Wednesday, it took Warner's board less than an hour to reject EMI's cash-and-stock offer, which amounted to $28.50 a share, a small premium to Warner's closing price of $27.29 Tuesday on the New York Stock Exchange.

EMI's offer hasn't been withdrawn, and it isn't clear how close the two companies were to agreeing on a price. People close to the situation indicated that Warner wouldn't accept an offer of less than $30 a share, equivalent to more than $5 billion.

from HOLD to SELL.

What ever that means ... Maybe citigroup is behind the EMI bid?

That must be based on their recent results. Odd... with a possible bid in the wind. Any other advisers saying sell?