Jilted EMI facing future sans suitors

Seagram/Polygram deal leaves music co. with no likely buyers

LONDON (Reuters) — British music firm EMI Group faced a lonely future after potential suitor Seagram Co. opted to tie the knot with Polygram in a $10.6 billion marriage, analysts said Friday.

Seagram’s decision to go with Polygram could put an end to takeover rumors surrounding EMI, which broke off talks two weeks ago because it failed to come to terms with a company presumed to be Seagram. EMI’s price was believed to be between $9 billion and $11 billion.

EMI, with a roster ranging from the Beatles library to the Spice Girls, had been seen as a takeover target because of perceived weakness in its management and sluggish forecasts for the industry’s music sales.

Although analysts didn’t rule out completely a bid for EMI by another music major, they said it was extremely doubtful.

“Seagram was the likely major trade buyer, and we don’t think there are any other trade buyers (for EMI),” said Nick Ward at Credit Lyonnais Securities.

Any other would-be industry buyers for EMI would likely run into regulatory problems due to overlapping market share.

“Seagram was the best obvious fit with EMI which would get through the regulators,” Anthony de Larrinaga at Panmure Gordon said, noting that EMI’s strong global operations were relatively weak in the United States, where Seagram’s Universal Music has its main strength.

“Any of the other majors would be precluded in acquiring EMI, given the scale of market share that the combined group would get,” he added.

EMI was widely expected to post lackluster profits due to the ongoing impact of Asia’s economic downturn, flat global music sales and the pound sterling’s strength.

Although it is possible EMI could get a bid from one of the leveraged buyout firms that were reported to be eyeing Polygram, analysts cast doubt on this scenario.

“It’s much harder for a leveraged buyout company to get the sort of synergies that a music business can,” Ward said.

When asked whether British entrepreneur Richard Branson, might be interested in buying EMI, another analyst said, “It would be a pretty large mouthful for him.”

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