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Last updated: February 2, 2011 11:37 pm
Impala, the European lobby group for independent record labels whose legal action tied up Sony Music’s 2004 merger with BMG in the courts for three years, has threatened to campaign against any deal to merge EMI with a competitor.
The threat comes a day after EMI fell into the hands of its lender, Citigroup. Several people who have discussed the bank’s plans for the UK music company said it was prepared to break EMI up, over the wishes of its management, if that could yield a higher price for the bank.
Warner Music, which is itself considering a sale, is looking to pull off a bid for all or parts of EMI. Universal Music and Sony’s separate recorded music and music publishing arms are also examining whether they could buy parts of EMI or Warner or acquire distribution rights.
Kohlberg Kravis Roberts is leading a pack of private equity suitors including Apax, Apollo and Permira. KKR has a music publishing joint venture with Bertelsmann, also called BMG, so could extract savings from an EMI or Warner deal.
People familiar with the discussions said that some of these interested parties had also approached Haim Saban, the creator of the Power Rangers franchise and part-owner of Univision.
Saban Capital nearly joined the buy-out group for Warner in 2004, but it is unclear whether Mr Saban would now be interested in either EMI or Warner or at what valuations.
Impala had said in 2007 it would prefer to see three strong recorded music groups, rather than have Universal and Sony followed by the smaller EMI and Warner. Industry members speculated that the group might be concerned about being squeezed out of a distribution deal with Warner or looking to negotiate better terms.
Helen Smith, Impala’s executive chairwoman, told the FT: “We don’t believe concentration is good for the music market. The mergers that have already happened have confirmed that.” She said she could not see any combination of existing recorded music or publishing companies clearing the European Commission without remedies, but indicated that Impala could change its view if bidders proposed measures to improve independent music companies’ access to the market.
One person who met Citigroup on Wednesday to discuss EMI said the bank believed the media group was more likely to be sold to an industry rival than to another private equity group.
“It was never really clear that this was suited as a private equity deal,” said the person. “Besides, trophy assets are off the agenda for private equity.”
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