EMI receives Warner bid approach

EMI receives Warner bid approach

Music group EMI says it has received an approach from US rival Warner Music that could lead to a takeover bid.

The move is the latest twist in a battle which has seen both firms try to buy the other in the past seven years.

The new approach by Warner Music comes after EMI issued a profit warning last week - its second of the year.

Warner said it had approached EMI on 24 January about a deal, adding that it saw "compelling strategic, commercial and financial logic" in a tie-up.

Warner - the world's fourth-largest music group - also said that it had the support of Impala - the trade group for independent music labels that has opposed previous deals in the industry.

However, EMI - the world's third-largest music group with artists such as Coldplay and Robbie Williams - said it had not received a firm offer and added there was no certainty one would come.

EMI's shares were trading up 16.5 pence, or 7.5%, at 238p in Tuesday afternoon trade.

Competition question

Previous attempts to merge EMI and Warner Music - the first coming in 2000 with another in 2003 - have come to nothing.

Last year, both companies made attempts to buy the other, but the moves were scrapped following regulatory fears.

In June 2006, a European court annulled approval of Sony Music's 2004 merger with Bertelsmann's BMG, and worries over whether authorities would allow an EMI-Warner tie-up caused the firms to end talks.

Impala had opposed the Sony-BMG deal, and Warner said the fact that it now had backing from Impala improved the chances of a tie-up with EMI.

"Warner Music Group (WMG) believes that the agreement reached with Impala and the measures envisaged under it, by setting a new framework for the relationship between a combined WMG and EMI and the independent music sector, improves the prospects for regulatory approval," Warner said.

Sales pressure

Last week, EMI said that profits for the year to March would be "significantly" below expectations.

It said sales in its recorded music division were expected to be 15% lower than the year before, with sales in its North American division down 20%.

Along with other music companies, EMI has been hit by the trend of consumers downloading individual songs from the internet rather than buying whole albums in physical form.

The label has also seen disappointing sales of major releases such as Robbie Williams' album Rudebox.

At the weekend, the Sunday Times reported that EMI was planning a financial overhaul which would see it borrow £1bn against its publishing business in order to pay off more expensive debt elsewhere in the group.

Story from BBC NEWS:

http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/6377857.stm

EMI records are in trouble, they need to do something to prevent going bust.