Perelman in five-way tussle for EMI

By Andrew Edgecliffe-Johnson Financial Times 10/02/11

Ronald Perelman, the billionaire buy-out investor, is vying with four of the world’s largest music companies for control of EMI, after private equity bidders backed off before this week’s deadline for second-round bids for the UK music company that fell into the hands of its bank in February.

Citigroup, which backed Terra Firma’s ill-fated buy-out of EMI, could get offers on October 5 in the $1.1bn-$1.5bn range for the group’s recorded music business and $2bn-$2.5bn for its publishing arm, people involved in the auction said.

Turbulent markets had already left two banks unwilling to lend to an EMI deal, one person said, making the auction’s outcome unpredictable. Citigroup is expected to name within two weeks a winner of the bids coming in, but could yet hold onto EMI if offers disappoint it.

The likely offers add up to less than the £4.2bn Guy Hands, of Terra Firma, paid for EMI, but is more than its valuation when Citigroup seized the company this year, writing off most of its loans to leave the company with £300m in cash and £1.2bn of debt.

Two people involved in the auction said Warner Music, bought for $3.3bn in May by Len Blavatnik’s Access Industries, had yet to decide whether to bid for the whole company, or only EMI’s recorded music division.

BMG, the publishing venture between KKR and Bertelsmann that bid low in the Warner Music auction, will decide this week whether to bid for the whole company or just music publishing, one person said. Sony ATV, Sony’s publishing joint venture with Michael Jackson’s estate, is expected to bid for EMI Music Publishing alone.

Universal Music, the Vivendi-owned market leader, is expected to make an offer for EMI Music, the recorded label side of EMI. Any industry members could face competition hurdles, and will have to assure Citigroup that they would shoulder any risk of regulatory intervention.

Mr Perelman’s Macandrews & Forbes, the privately held holding group for assets including Revlon cosmetics, joined forces with Sony in the Warner Music auction and is understood to be most interested in EMI’s recorded music business.

Mr Perelman, a drummer whose media interests include Deluxe, a Hollywood film processing business, could look for a bidding partner interested in publishing, two people close to the auction said, or seek a distribution deal with a larger music company if it wins control of EMI Music.

One person familiar with the auction process said other wealthy parties including Ron Burkle, the billionaire investor who bid for Warner Music, could still show their hands, but people close to the auction said private equity bidders had fallen away.

Alec and Tom Gores, the brothers who control Gores Group and Platinum Equity respectively, bid aggressively for Warner Music but are understood to have decided against an offer for EMI. Apollo, the private equity group, is also now not expected to bid. All the companies declined to comment.

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