Warner Music Group has decided not to make an offer for EMI this week but has left the door open for possible merger talks at a later date.
EMI has already agreed to a £2.4 billion ($4.9 billion) takeover by private equity group Terra Firma. Warner Music was seen as the only other potential bidder, as the company has discussed mergers and takeovers with EMI several times over the last seven years.
The deadline to submit an offer is Thursday.
If a bid for the EMI sale is approved, WMG has reserved the right to announce or participate in an offer for the U.K.-based recorded music and music publishing company. Warner, which owns the Atlantic, Elektra, Reprise, Nonesuch, Rhino and Warner Bros. labels, can re-enter talks in six months.
Warner Music Group has been partnering with former EMI Music chief Jim Fifield in considering whether to place a counterbid for EMI, which has a catalog that includes the Beatles, Beach Boys, Frank Sinatra and Radiohead and has Coldplay, Norah Jones and KT Tunstall currently inked.
Terra Firma, through its bid vehicle, Maltby Ltd., has said it has 3.8% of shareholder acceptances. Several other private equity groups had been granted due diligence — Cerberus Capital Management, Fortress Investment Group and One Equity Partners — but none have submitted bids.
There were reports that if One Equity, the private equity arm of JPMorgan, were to top Terra Firma’s bid, it would have installed Michael Ovitz as chairman of the board. Ovitz had created a business plan for EMI that included artist management in addition to a massive restructuring and an increased emphasis on the mobile community.
Warner Music stock closed at $13.47 prior to the company’s announcement, up 7¢ from the day before, when WMG hit its 52-week low. EMI closed at 267 pence ($5.47), up 0.19% from the day before.
Warner Music and EMI announced a merger in early 2000 that fell apart soon thereafter. In the years since, top execs at the two companies have made plays for mergers or acquisitions.