KKR and Warner Music talk over break-up bid for Coldplay label EMI

EMI, which is owned by Terra Firma, the private equity group controlled by financier Guy Hands, could be put up for sale this summer, reports the Telegraph this week. Warner, which has long coveted EMI's recorded music division, and KKR, which is interested in the music publishing business, are understood to have met in recent weeks to discuss how they might structure a bid. However, no approach is thought to have been made and talks remain at an early stage.

EMI, home to artists including Robbie Williams, Coldplay and Katy Perry, is under pressure to come up with a rescue plan over the next few weeks that will persuade investors to back a £120m refinancing to stop the company being taken over by Citigroup, its lending bank.

Sources believe Citigroup would be quick to put the company up for sale if it seizes control. Any deal to buy EMI would likely not take place before the music company's stand-off with Citigroup is settled. EMI needs to find the £120m of new investment by mid-June to avoid a covenant breach on its £3.2bn of debt. In a further twist, Terra Firma has launched a lawsuit against Citigroup alleging it was mislead over the acquisition of EMI in 2007.

EMI's music publishing arm is thought to be worth about £1.2bn, although its music recording business is more difficult to value given the departure of big name artists including the Rolling Stones and Radiohead. The recorded music division was responsible for 55pc of EMI's £293m of profits last year. Both divisions are putting together five-year business plans that will include future trading and profit projections. Terra Firma needs the backing of 150 of its 200 investors, who have already seen their investments in the music company all but wiped out.

The company was hit last week by the departure of music boss Elio Leoni-Sceti. Charles Allen, the former ITV boss and currently non-executive chairman, will step up to an executive role following Mr Leoni-Sceti's departure. Warner has coveted EMI's recorded music business for the last decade but a previous proposal for a tie-up was blocked by competition authorities. It is understood that Warner believes a deal would be given the green light by anti-trust authorities this time around.

KKR and EMI declined to comment.

Pictures of Coldplay at Estadio Universitario, Monterrey, Mexico (11th March 2010):