Media investor Alec Gores is weighing an offer for British music company EMI through his buyout shop, The
Universal Music Group, the world’s largest music company, also is working on a bid to buy EMI, a source familiar with the situation told Reuters. Universal’s owner Vivendi backed the plan, the source added. Other suitors are likely to include Len Blavatnik‘s Warner Music Group, which has long been seen as a natural partner for EMI.
EMI, was put up for sale earlier in June by lender Citigroup, which took control of the ailing firm in February after its previous financial sponsor,
Analysts had previously thought regulators would block any deal by Universal to buy EMI, the world’s fourth-largest music company, after European regulators objected to consolidation among other major music groups. However, the industry has since endured a torrid time, with many music retailers going out of business and millions lost to online piracy.
Smaller independent labels, which had previously joined forces to object to consolidation amongst the largest companies, have also increased their market share in recent years, while EMI’s has fallen. “They’re in the frame,” the source said of Universal. “The will is there, and a data room should be set up fairly soon. They believe Vivendi are supportive, as they realize this is the last game-changing acquisition to be made.”
Universal’s last major acquisition was the purchase of BMG Music Publishing, which it bought before applying for regulatory approval. It then agreed with the European Commission to sell certain assets to secure its clearance. If Universal tried the same approach with EMI, it would probably have to sell EMI’s lucrative publishing arm and possibly other recording assets in certain markets.
Analysts estimate that EMI could be sold for between $2.5 billion and $4 billion, after it reduced costs in recent years. It can also boast a strong classical division and a catalogue that includes the Beatles and Kylie Minogue.
Universal and Vivendi declined to comment, while Warner and Gores were not available to comment.
The company, home to artists such as Katy Perry and Iron Maiden, said in a statement that there was no certainty that the process would result in a transaction. It said it would not disclose further developments until its board had approved a strategic plan.
Citigroup took control of EMI in February in a blow to its previous private equity owner, Guy Hands‘
Blavatnik, Gores and Vivendi were not immediately available for comment.
(Nadia Damouni is a reporter for Reuters in New York; additional reporting by Megan Davies, Kate Holton and Matt Scuffham.)