Chair sez he's 'ready to move on' as profits fall 20%
LONDON — EMI’s second profit warning this year and the admission by EMI chairman Colin Southgate that he is “ready to move on” has pushed the music giant back into the spotlight as a takeover target.
EMI warned on Monday that operating profit for the first half of 1998 would be down 20%, news that sent the record company’s share price plummeting, to $5.76 from $6.65 by the end of Tuesday.
That is about half of the $11.76 per share EMI was reportedly holding out for five months ago when Seagram chief exec Edgar Bronfman abandoned his approach and instead agreed to a $10.4 billion deal for Polygram.
EMI decided not to bid for Polygram Filmed Entertainment last week, only two days before deadline and after the company had taken pains to present itself as a serious suitor. Analysts pointed to the fragility of EMI’s stock price — even prior to the warning — as the reason for an about-face on PFE.
EMI has been plagued by a series of problems, including the controversial departure — at a cost of $21 million — of EMI music chief exec Jim Fifield after he failed to be appointed group chief exec.
Southgate said he intends to stay in place until his contract expires in July 2000 but is looking to find a replacement over the next few months. That could mean the 60-year-old Southgate will soon move into a non-executive role.
EMI’s woes are not unique — poor sales in Asia and now Latin America have impacted the entire music biz. Unlike the rest of the majors, however, EMI has not diversified into other entertainment interests and is therefore more exposed.
The question is whether anyone is looking to buy a record company given current market conditions. Those thought interested include Bertelsmann, Disney, News Corp. and Microsoft.