Share: del.icio.us | Digg this | Permalink | (What's This?)

http://www.digitalmusicnews.com/stories/071207emi

European Regulators Approve EMI Buyout Bid, Warner Paces
July 12, 2007
Alexandra Osorio

The European Commission has now officially approved an EMI takeover bid by private equity concern Terra Firma. The regulatory nod, largely expected, offers another step towards a consummated deal, though investor buy-in remains low. The hesitance is being driven in part by a potential bid by Warner Music Group, though the rival major has mostly been floating empty overtures. The Terra bid, which first emerged last month, values EMI at roughly £2.4 billion ($4.8 billion), softer than earlier bids.

Investors and executives are increasingly skeptical on the prospects of a serious Warner buyout move. WMG shares recently landed at $14.10 on the New York Stock Exchange, a value that barely hovers above a 52-week low of $13.89. The downward pressure is being intensified by continued drops in cash-crop CD sales, both in the United States and globally. The quickening slide is shrinking the execution window for labels on diversification strategies, and raising fears that a bottom may never materialize.

According to media entrepreneur Grayson Brulte, an ongoing imbalance towards recorded assets will continue to weigh heavily on investor sentiment. "Investor anxiety is obvious and growing," said Brulte. "If the Warner stock continues to slide, shareholders should demand the resignation of Bronfman." Also sour on Warner prospects is Richard Greenfield of Pali Research, who noted that regulatory uncertainties are forcing Warner to rally an uncomfortably elevated and unrealistic bid. "The regulatory risks remain unknown (making it difficult for EMI to get involved with WMG) and it is unclear whether WMG has the support of their private equity owners to actually make a bid at all," Greenfield noted alongside a WMG sell rating.