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Re: [ARSCLIST] EMI is NOT about to be bought by a private-equity firm



Another update. LOOKS LIKE I WAS WRONG



EMI Set for Buyout by Terra Firma; Warner Stock Jumps (Update3) 5 hours ago

By Mark Herlihy


Guy Hands, founder of Terra Firma Capital Partners July 18 (Bloomberg) -- Terra Firma Capital Partners Ltd. appeared set to win the battle to buy EMI Group Plc, the record label for the Beatles, after both Warner Music Group Corp. and former company executive Jim Fifield decided against making bids.


Terra Firma, Guy Hands' London-based buyout firm, is the sole bidder. The firm in May agreed to pay 265 pence a share, or 2.4 billion pounds ($4.9 billion). As of last week, shareholders with only 3.82 percent of the stock had accepted the offer because of the prospect of rival bids.

An acquisition by Terra Firma would mark an end to seven years of attempts by EMI and Warner Music to buy each other amid falling music sales worldwide. Warner Music made the right decision in not bidding, because a purchase would have weighed on earnings and saddled it with too much debt, said Richard Greenfield of Pali Capital in New York. The shares had their biggest gain since the company's 2005 initial public offering.

``Buying EMI would have been far too dilutive to WMG shareholders and created too much financial risk,'' Greenfield said in a report to clients today. He raised his rating on Warner Music to ``neutral'' from ``sell.''

Warner Music shares jumped $1.23, or 8.9 percent, their biggest increase ever, to $15 at 4:03 p.m. in New York. Shares of London-based EMI fell 5.25 pence, or 2 percent, to 261.75 pence. EMI shares had closed above 265 pence every day since Terra Firma made its offer, on the expectation Warner would bid.

Tomorrow's Deadline

Terra Firma last week extended its offer until 1 p.m. tomorrow. The buyout firm this month secured antitrust approval to buy EMI from the Brussels-based European Commission.

Warner, whose artists include Madonna, said last month it may make an offer. The New York-based company said late yesterday in a statement that it reserved the right to bid or participate in a proposal for EMI in the next six months.

Still, Terra Firma may give Warner Music what it wants by ultimately selling EMI's recorded-music business to Warner, said Laura Martin of Soleil Securities in Pasadena, California. That would leave Terra Firma with EMI's music-publishing unit.

``This strategy is better for Warner Music because it allows Warner to buy just recorded music rather than all of EMI,'' said Martin, who rates Warner shares ``buy'' and doesn't own them.

Fifield, a former chief executive officer of the EMI Music unit, and other former managers had been considering a cash bid that would have been at ``a significant premium'' to Terra Firma's offer, according to a statement issued by Fifield today. The group couldn't make an offer by the deadline of noon tomorrow set by the Takeover Panel, according to the statement.

`Serious Doubts'

``The board of EMI has serious doubts about that suggestion and the credibility of any possible offer,'' the company said in a statement. Fifield never contacted the company, EMI said. Fifield wasn't among the several potential bidders who studied EMI's finances, the company said.

Warner was interested in EMI's recorded music unit. Led by Edgar Bronfman Jr., Warner is looking for additional revenue as illegal file-swapping of digital recordings reduces sales of compact discs. Industrywide, U.S. album sales fell 15 percent in the first half of 2007 from the same period last year. EMI recommended that shareholders accept the Terra Firma offer.

Warner Music now will have to reduce expenses without the benefit of cost reductions that it could have wrung out of a merger, Greenfield said. ``WMG needed EMI,'' he said. ``Without EMI, WMG may be forced to cut its own business farther than it otherwise would have wanted to.''

To contact the reporter on this story: Mark Herlihy in London at Mherlihy1@xxxxxxxxxxxxx .


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