Universal Music, Sony to buy EMI from Citigroup for $4.1 billion

14 Nov 2011

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EMI, the 114 year-old London-based gramophone company that was home to artists like the Beatles and Pink Floyd, was sold over the weekend in an auction to Vivendi's Universal Music Group and Sony for $4.1 billion.

Citigroup, the owner of EMI since February this year, sold EMI's recorded music division to Universal for $1.9 billion, and the smaller but more lucrative music publishing business to Sony led consortium for $2.2 billion.

The two outbid rival bids from Warner Music Group and BMG Chrysalis. Warner had bid for the recorded music unit, while BMG Chrysalis bid for EMI Publishing.

EMI's recorded music division is home to The Beatles, Pink Floyd, Coldplay and one of the world's most respected classical music catalogues.

Universal, the world's largest music company, is paying seven times earnings before interest, taxes, depreciation and amortization for EMI's recorded-music business, and expects about $160 million of annual savings.

Universal's chief executive and chairman Lucian Grainge said he was ''committed to both preserving EMI's cultural heritage and artistic diversity and also investing in its artists and people to grow the company's assets for the future''.

With the acquisition of EMI, the enlarged Universal would control more than 40 per cent of the global market and 38 per cent in the US.

However, the acquisition will have to be approved by the regulators and European independent labels coalition Impala have already urged the European commission to block the Universal/Sony acquisition of EMI.

Anticipating regulators concerns, Universal said that it will sell off £500 million of non-core assets.

A consortium led by Sony, the world's second-largest music group, along with the Estate of Michael Jackson, Mubadala Development Company PJSC, Jynwel Capital Limited, the Blackstone Group's GSO Capital Partners LP and David Geffen, saw off bid from BMG Rights Management, a joint venture by Germany's Bertelsmann and the private equity firm Kohlberg Kravis Roberts for acquiring EMI's music publishing business.

EMI Music Publishing represents some contemporary writers in the music industry today including Beyoncé, Drake, Jay-Z, Norah Jones, Alicia Keys, P!nk, Rihanna, Stargate, Usher, Kanye West, among others.

New York-based Citigroup had in June 2011 put troubled British music company EMI for sale. The move by Citigroup was widely expected by analysts after it seized control of the London-based music company from Terra Firma.

Terra Firma, led by financier Guy Hands had acquired EMI through a Citigroup run auction in 2007 for $6.5 billion in a highly leveraged buyout just before the onset of the global financial crisis with Citigroup loaning Terra Firma $5.4 billion for the acquisition.

But with the global economy in shatters and online piracy ravaging the music industry EMI was crushed under the weight of its debt. Guy Hands later took Citigroup to court accusing it of having duped it into buying EMI, and lost the case.

Citigroup seized EMI in February and wrote off 65 per cent of its loan, leaving EMI with a manageable debt of $1.9 billion.

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