EMI to Weigh Sale or IPO Following Label’s February Seizure by Citigroup

EMI Group Ltd., owned by Citigroup Inc. (C), said it will consider selling itself as the label of the Beatles and Pink Floyd evaluates strategic alternatives.

The board will also look into a possible public offering of shares or a recapitalization, the London-based company said in a statement today.

EMI and other labels have found it more difficult to turn a profit as more customers use file sharing websites to download music for free rather than buying songs from record companies. A sale would follow billionaire Len Blavatnik’s deal on May 6 to purchase rival Warner Music Group Corp. (WMG), which valued the company at more than $3 billion, including debt.

“There was a lot of interest in Warner, so I would expect a lot of bidders for EMI, including the guys who won Warner,” said Laura Martin, a Los Angeles-based analyst at Needham & Co. A sale is the most likely option since media companies typically get their highest valuations through acquisitions, she said. The other options are “a negotiating ploy” to let bidders know they have choices.

Citigroup seized control of the label in February after EMI and its owner, Terra Firma Capital Partners, struggled to meet debt terms. The music company was taken private by Guy Hands’s Terra Firma in 2007 in a deal that valued EMI at about 4 billion pounds ($6.5 billion). EMI is likely to get less than that today, Martin said.

Potential Bidders

Blavatnik or a bidder like KKR & Co., which co-sponsors Bertelsmann AG’s music-rights venture BMG Rights Management GmbH, may be interested in bidding for EMI, Martin said. Kristi Huller, a spokeswoman for KKR, declined to comment. Roberta Thomson, a spokeswoman for EMI, also declined to comment.

Warner Music Group passed on a higher offer from a group that included Sony Corp. when it accepted the $8.25-a-share buyout bid from Blavatnik, people with knowledge of the music company’s auction said on May 20.

Sony, with Guggenheim Partners and Ron Perelman, was willing to pay $8.50 a share for Warner Music, or 3 percent more than the $1.3 billion offered by Blavatnik’s Access Industries, according to the people, who declined to be identified because the deliberations were private.

Citigroup fell 0.4 percent to $38.16 in New York Stock Exchange composite trading today.

To contact the reporter on this story: Amy Thomson in London at Athomson6@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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EMI to Explore Potential for Sale or Initial Public Offering

Chris Ratcliffe/Bloomberg

EMI and other labels have found it more difficult to turn a profit as more customers use file sharing websites to download music for free rather than buying songs from record companies.

EMI and other labels have found it more difficult to turn a profit as more customers use file sharing websites to download music for free rather than buying songs from record companies. Photographer: Chris Ratcliffe/Bloomberg