Money Matters - Simplified

EMI approached with $4.8B Takeover Bid

EMI Group Plc is confirming news that they have been approached with a takeover bid amounting to $4.8 billion. This is actually the second bid for the music company in 6 months.

EMI approached with $4.8B Takeover BidGet original file (5KB)

Earlier this year EMI was offered $4.6 billion by Warner Music. These two music companies have been locked in a takeover battle since 2002. EMI tried to buyout Warner to reduce cost by bidding $31 a share for the US-based Warner Music.

Deals between the two are not being entertained after a European Court nullified approval on Sony Corp’s Sony Music and Bertelsmann’s BMG merger due to regulatory issues.

Kohlberg Kravis Roberts Co. and Goldman Sachs (Charts) are reported to be among the potential suitors. Analyst, however, believes that private equities will also be interested in bidding for EMI.

Private equities have been investing heavily in music companies due to increases in profit gained from Internet download. CD piracy has been a problem for most music labels but is projected to be minimized with the availability of digital music online.

Shares rose almost 11 percent to 292 pence following this news. This is the biggest gain since November this year valuing EMI at $4.45 billion. Album releases of EMI's Robbie Williams, Norah Jones and Keith Urban later this year will also manage to cut back losses suffered in the first half.

Whoever wins the bid, there is a big possibility that they might also try to buyout Warner Music. Buyout firms have been aggressive in their takeovers, reporting new funds amounting to $172 billion. The total amount of deals have tripled from 2005's $265.5 B to $616 billion, according to Bloomberg’s data.

Growth for the buyout market continues and is not projected to slow down for many years.