What used to be considered the ‘Big Four’ will soon be down to the ‘Big Three’. EMI has been sold, and like I speculated in February – it has been sold as parts.
EMI Ceo, Roger Faxon, sent an email to his staff in which he informed them that the company would be split up. Faxon assures his staff that there were interested buyers to EMI as a whole, but the financial markets got in the way. “With credit spreads widening and little access to debt capital it became difficult for financial bidders to formulate compelling proposals at the right price”. And so, EMI will be split in half. However the separation of the two businesses will take some time, so for the time being EMI remains the same as it was before the sale.
EMI’s recorded music division has been sold to Vivendi’s Universal Music Group (UMG) for $1.9 billion. The price tag represents 7 x the company’s earnings before interest tax depreciation and amortization (EBITDA). The cost will be financed from Vivendi’s existing credit lines, and UMG will see about $500 million in non-core UMG assets. However, independent labels are protesting the sale of EMI to UMG claiming that UMG is too powerful as is.
EMI’s music publishing division has been sold to group led by Sony. The investment group is made of Sony Corporation, the Estate of Michael Jackson, Mubadala Development Company, Jynwel Capital Limited, the Blackstone Group’s GSO Capital Partners, and David Geffen. The price tag the heralded publishing division comes in at $2.2 billion. Once the transaction is complete Sony / ATV Music Publishing will oversee the operations of EMI music publishing. Much like the protest with EMI & UMG, independent music publishers have protested the sale of EMI to Sony. They might not have much basis to the protest though, because unlike the sale to UMG, this sale will allow EMI Publishing to operate as a separate business entity.
Both Universal and Sony need to clear necessary regulatory hurdles before they can take ownership of EMI. In other words – nothing is final just yet – and in this industry, things can change overnight.
References
Read CEO Roger Faxon's Letter To EMI Staff On Sale To Universal
Citigroup Press Release on EMI Sale To Universal Music Group
Citigroup Statement Announcing Sale of EMI Publishing to Sony / ATV Group
