EMI again strikes Warner merger chord
LONDON — EMI has restated its desire to pursue a $4 billion-plus takeover of Warner Music after reporting strong financial results for the year ended March 31.
The acquisition of Warner Music, EMI Group chairman Eric Nicoli said, “represents a positive strategic initiative for EMI and an initiative that will allow us to create very substantial value for our shareholders. We also think it represents an attractive offer for Warner Music shareholders.”
Financially, both the EMI Music and EMI Music Publishing divisions outperformed the global recorded music industry in the fiscal year to March 31. Group profit after taxation increased 19.7% to £131.2 million ($247.5 million) from $206.7 million.
Revenues increased 3.9% to $3.9 billion, with digital music sales more than doubling to $211.4 million.
“The results last year were evidence that we have an effective strategy,” Nicoli claimed. “We have achieved a good balance between creative freedom and financial discipline, and there is no reason why that shouldn’t continue, driven in particular by the growth of digital, where we’ve been at the forefront of development within the industry now for some years. So the prospects are bright, with or without a deal.”
EMI’s offer of $28.50 per share was rejected by Warner Music chairman Edgar Bronfman Jr. EMI will reportedly return with an offer of about $30 per share, possibly going as high as $32.
In discussing the deal, Nicoli stressed that the London-based company must retain management control and that competition watchdogs will be much more open to the merger than they were in 2000.
“We wouldn’t have proposed a deal if we didn’t think that it could receive regulatory approval,” Nicoli said. “The environment has changed dramatically since we last considered a transaction and, assuming a deal can be struck, then we will work closely with the regulators as they review our proposal.”
As for the outlook at EMI, both divisions “have a very strong release schedule,” he said. “We anticipate continuing strong digital growth, and we have the beginnings of a new restructuring initiative that’s designed to take $56.6 million of costs out annually. So I’m optimistic about the current year.”
Results owed to strong-selling albums by Coldplay, Dem Franchize Boyz, Gorillaz, Korn, Raphael, RBD, KT Tunstall, Keith Urban and Robbie Williams. EMI Music Publishing enjoyed success through such acts as Arctic Monkeys, Black Eyed Peas, James Blunt, Kelly Clarkson, Daddy Yankee, Eminem and Kanye West.
EMI owns Capitol Records, Virgin Records and Blue Note, among other labels.
EMI stock rose 1.3% Tuesday to close at $4.97. Warner Music was down half a percent, closing at $27.01.