Warner Music Passed On a Higher Offer

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Warner Music Group could be answering some difficult questions from stockholders, particularly over a decision to reject a higher acquisition offer.

According to SEC documents submitted Friday and shared with Digital Music News, a ‘Bidder B Consortium’ offered a 3 percent premium over the winning bid from Access Industries.

Bloomberg pegged the consortium identity as Sony/ATV, Guggenheim Partners and Ron Perelman, though the duo of Tom and Alec Gores may have also been rattling a higher offer.  Blavatnik won the derby with a $3.3 billion, $8.25-per-share bid.

The better ‘B’ offer had a higher valuation, but carried some conditions and potential delays.  “On the evening of May 5, 2011, the Bidder B Consortium indicated that it might be willing to increase its bid to up to $8.50 per share, but noted that its bid was still conditioned upon satisfactory completion of due diligence… and obtaining approvals of its senior management, Bidder B’s board and a third party.”

Access founder Blavatnik, on the other hand, appeared more willing to part with his $3.3 billion in cash.  “Goldman Sachs delivered its opinion to the Company’s Board of Directors that… the $8.25 per share of WMG common stock in cash to be paid to the holders of outstanding shares of WMG common stock pursuant to the merger agreement was fair from a financial point of view to such holders.”

The question is whether shareholders will green-light the merger, or push for a better payout.  On Friday, Warner began soliciting investor approval, and pointed to a forthcoming shareholder meeting to conduct the vote.  Sounds like standard procedure, except that two different investors have launched lawsuits alleging that Warner breached its fiduciary responsibilities and undercut the payout.  If the deal falls apart, there are financial penalties involved – depending on the reason.

Separately, Warner also confirmed the departure of longtime executive Michael Fleisher.