Tensions — and prices — are rising in the Warner-EMI saga.
Each company disclosed Wednesday that it had received a sweetened offer from the other — and that it had rejected that offer.
The British-based EMI Group confirmed press reports that Edgar Bronfman’s Warner Music Group had two weeks ago offered just under $4.5 billion for EMI, following EMI’s offer in May to buy Warner for about $4.2 billion in stock and cash.
EMI said it rejected the WMG offer and had countered with its own new offer of $4.6 billion, all in cash.
On Tuesday Warner rejected that offer — and countered by upping its own a bit to $4.56 billion.
Each side also took its battle to the press. Amid a complicated chronology, EMI characterized a WMG offer as “wholly unacceptable.” WMG, meanwhile, explained its bid and outlined its case for why it should be the one doing the buying.
“A WMG acquisition of EMI will provide shareholders of both companies with a superior opportunity to realize significant value,” it said in a statement.
The head-spinning sets of offers and counteroffers — and careful positioning in the media — suggests that both sides want a merger but that differences in price may be insurmountable.
Some observers think WMG is holding out for a $5 billion pricetag, but there’s little indication as yet that EMI will venture that high. EMI’s latest offer would pay WMG $31 per share, which amounts to nearly a $3 premium over its current price.
Some analysts believe the companies will eventually merge. But the leaks about the negotiations are having an oddly adverse effect on the potential for a sale — they are sending the stock prices higher, which could in turn drive up the sale price. WMG’s stock rose 3% in U.S. markets; EMI Group spiked 8% in the U.K.
And as EMI ups its offer but still meets with rejection, it refutes the theory that WMG was simply holding out for a better price.
Observers think a disagreement over which company would be the buyer could be what’s gumming up the works. Who would run the firm has been cited by analysts like Jessica Reif Cohen as the main sticking point.
Each side would have reason to be the acquirer — as well as the target.
EMI is the larger firm, but WMG has been more successful of late. And while some speculate that Bronfman may be looking to cash out, others say he would only be happy in a situation in which he and his management team are running the company.
At another time, a creative partnership between the two could emerge. But after assorted disasters in the Sony-BMG relationship, insiders say a 50-50 split will never fly.
Together, the merger between the third- and fourth-largest record companies could result in savings of several hundred million dollars. But as negotiations wear on, doubts inevitably arise. As for regulatory authorities, they’ve scotched such a merger once before.