Warner Music Group Ponders Refreshed Bid on EMI

  • Save

After a high-profile rejection at the hands of EMI, Warner Music Group is now reportedly readying a renewed takeover bid.

According to a recently published report in the London Observer, WMG chairman Edgar Bronfman, Jr. is planning a second take, but is seeking some assurances from EMI beforehand.  Earlier this month, EMI rejected a Warner offer of 260 pence per share, a larger valuation of approximately £2.1 billion ($4.1 billion).  According to an EMI statement, it was “not in the best interests of EMI shareholders to entertain a pre-conditional offer which would entail prolonged regulatory uncertainty and unacceptable operational risk at a critical time for the company,” while the price was simply judged as “inadequate”.  Hoping to avoid a repeat result, Bronfman has reportedly reached out to EMI chairman John Gildersleeve to pave the way for a successful retry.  “This is a marriage that is going to happen at some point; they have talked so often in the past,” one executive told the Observer.

Warner is not the first group that EMI has rejected.  Earlier, EMI issued a snub to private equity group Permira Advisors, Ltd., which floated a proposed buyout valued at £2.5 billion, or $4.93 billion.  Prior to that, EMI actually rejected another WMG proposal of £2.54 billion, or $4.6 billion, raising questions of whether EMI is mistiming its exit completely.  But details surrounding the Permira rejection are complicated, and could involve issues related to due diligence findings.  And a Warner bid automatically ushers a protracted and complicated regulatory review process, with or without an alliance involving independent trade group Impala in tow.  Perhaps that has the label waiting for a sweetheart purchase offer, though the company continues to experience pronounced valuation dips.