EMI high on offer

Seagram rumored suitor; stock soars

LONDON — EMI Group confirmed Thursday it had been approached about a possible takeover offer, believed to have come from Universal Studios’ parent Seagram Co., although the music giant would not confirm the suitor’s identity.

EMI’s stock price skyrocketed 20% after the company’s admission, ensuring any offer would be more expensive.

In a statement, EMI said that following media speculation it “confirms that it has received an approach about a possible offer for the company.”

EMI cautioned, however, that “shareholders should not assume this approach will result in an offer being made for the company.” EMI would not comment further, and a Seagram spokeswoman in New York declined comment.

Raising the bar

EMI’s statement may have itself made an offer less likely. EMI’s stock price, which had risen 9% since Daily Variety reported April 20 that talks were back on between the two companies, rose another 20% Thursday after the music giant’s statement to close at 609p ($3.65). Seagram’s stock price rose $1.12 to $42.68.

EMI’s market valuation has now risen to about $9 billion. As the music giant is believed to want a premium to the market price of about 25%, any offer would need to be priced at close to $11 billion to succeed.

One of the reasons Seagram restarted talks several weeks ago, sources said, was that EMI’s stock price had come down sufficiently over the previous 12 months to make a deal viable. EMI fell 33% from May last year until Daily Variety’s report that talks between the two companies had restarted.

Close enough to talk

Seagram CEO Edgar Bronfman Jr. is currently in London. Seagram won’t comment on his business dealings, but he is known to have been having talks with EMI chairman Sir Colin Southgate over the past few weeks. Southgate reportedly also recently visited Los Angeles and met with Bronfman.

Seagram has been contemplating a bid for EMI since before the music company demerged from consumer electronics group Thorn in August 1996. The liquor and entertainment conglomerate commissioned a study of EMI from two investment banks about two years ago, but reports of Seagram’s interest drove the stock price up.

Difficult global conditions in the music industry sent the stock price down subsequently, taking the cost of a bid down to between $7 billion and $9 billion, which is well within Seagram’s reach.

Well-suited suitor

Many analysts consider EMI and Seagram a “good fit.” Seagram’s Universal music division, the smallest of the Big Six global record companies, is strongest in the U.S. market, where EMI is a comparatively lesser player than it is in the international market.

Reuters said EMI denied a report published in the Financial Times on Thursday that it had received an approach from Kirk Kerkorian, the American takeover specialist.