EMI Group reject Warner Music bid

Record companies engage in bid brinkmanship

LONDON — The directors of EMI Group and Warner Music are testing each others nerves as it emerged today the two record companies have made a series of bids and counter-bids to buy each other in the past two months.

Reacting to media speculation, EMI today admitted that it had made two offers to take over Warner Music, and that Warner had responded with two offers to buy EMI. All the bids were rejected.

The tit-for-tat bidding war started May 3, when EMI tabled a cash-and-shares bid for Warner, worth about $28.50 per share.

Warner retaliated June 14 with what EMI describes as “initial unsolicited alternative proposal” to acquire all of the share capital of EMI for 315 pence ($5.74) per share in cash. That, says EMI, was “wholly unacceptable and unanimously rejected.”

EMI then made a revised proposal June 23 to Warner to acquire all of the outstanding shares of Warner Music for $31 per share in cash. EMI would fund the takeover through debt finance and a rights issue, plus the disposal of certain music publish-ing assets.

Warner communicated its rejection of EMI’s latest offer June 27, and countered at the same time with its own revised cash offer of 320 pence ($5.84) per EMI share, in cash.

The board of EMI has also unanimously rejected that proposal, stating it was “wholly unacceptable, having regard to EMI’s prospects, the potential synergy benefits of a combination of the two companies and the range of strategic options available to EMI.”

News of the various transatlantic offers boosted EMI’s share price by nearly 10% to a four-year high of 310 pence by midday in London today.

In a statement, EMI said: “The board of EMI continues to believe that an acquisition of Warner Music by EMI at $31 per share in cash would be very attractive to both sets of shareholders and would deliver value to EMI’s shareholders which is far superior to Warner Music’s revised alternative proposal. The board of EMI is committed to pursuing such a transaction only if it delivers enhanced value and earnings accretion to EMI shareholders.”

The company added that it will make further announcements as appropriate. Analysts expect at least one more bid to emerge in the coming days.

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