World's fourth-largest music company denies $4.2 billion offer after board evaluation determines deal not in best interest of shareholders
Warner Music, the world's fourth-largest music company, has rejected a $4.2 billion takeover approach from its larger rival EMI Group, the latest in a long-running quest to combine the two companies.
EMI, whose artists include Coldplay and Robbie Williams, revealed the bid of $28.50 per share Wednesday and said it still believes that buying Warner Music would be a good deal for both companies' shareholders. Warner Music and EMI, the world's third-largest music company by revenue, have tried to merge twice before but were blocked by European regulators.Analysts have long expected the firms to try yet again in order to compete more effectively with their much larger rivals Universal Music and Sony BMG.
In May 2004, Edgar Bronfman Jr. and a group of private equity firms beat EMI to buy Warner Music from media conglomerate Time Warner for $2.6 billion.
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EMI said it approached Warner Music on May 1, and a day later Warner Music told the company it did not want to enter discussions regarding the proposal.
Warner Music, home to Madonna and James Blunt, said its board carefully evaluated the proposal and determined it was not in the best interests of its shareholders.
The cash and shares offer from EMI was "less than impressive," a source close told Reuters.
The offer of $28.50 a share represents an 18 percent premium to Warner Music's shares before an April 23 report in Britain's Sunday Times that said the companies were preparing for preliminary talks.
"This is disappointing as we believe the logic for combining the two businesses is compelling," said Numis analyst Lorna Tilbian. "Today's announcement highlights the difficulties in putting together such a deal, particularly with respect to valuation and management."
Bronfman and the private equity firms - Thomas H. Lee Partners, Bain Capital and Providence Equity Partners - own about 75 percent of Warner Music, according to Reuters data, meaning a hostile attempt is an unlikely option for EMI.
The approach was reported by Reuters and other news organizations Tuesday, with Reuters citing a source close to the matter.
EMI shares were down 3.5 percent to 272-1/4 pence. Warner Music's (Research) shares closed up 1.1 percent to $27.29 on Tuesday on the New York Stock Exchange.
EMI's shares recently reached a four-year high of 300 pence as speculation of a takeover approach resurfaced. Warner Music's shares started trading at $17 each when its IPO was launched a year ago.