EMI Gears Up for 'Possible Sale' Read CEO Roger Faxon's Memo to Staff
EMI issued a statement on Monday saying that it has launched an effort to find a new owner, among other "strategic alternatives."
The company's board "has initiated a process to explore and evaluate potential strategic alternatives, including a possible sale, recapitalisation or initial public offering of the Company," the statement reads. "In making the announcement, EMI stated that there can be no assurance that this strategic review process will result in a transaction. The Company does not intend to disclose developments with respect to its strategic review process unless and until its Board of Directors has approved a specific transaction. "
The company was taken over by its creditor, Citigroup, earlier this year in a debt-for-equity swap, ending Guy Hands' troubled reign at EMI, which began with his £4 billion buyout of the company in 2007 through his private equity firm Terra Firma. The acquisition was financed with debt from Citigroup, and speculation has been rife in recent weeks that the company would take over EMI before March, when Terra Firma's debt to CitiGroup was due.
The recent sale of Warner Music Group to Len Blavatnik's Access Industries is widely seen as a promising sign for the sale of EMI, and Blavatnik is expected to be among the bidders. EMI and Warner have attempted to merge in the past, but were unable to surmount regulatory hurdles.
In a memo to EMI's staff from CEO Roger Faxon obtained by Billboard, the executive puts a positive spin on the day's announcement.
"Well we are off to the races," the statement reads. "In about a half an hour we will be announcing that we are beginning a strategic review process in earnest. We, along with Citi, intend to explore all possible alternatives, including a sale, recapitalization or IPO of EMI - all with the aim of setting the stage for the next chapter in EMI's ownership. That is not to say that Citi has not been a great owner -- they have! They have been nothing but supportive of our strategy and our team. But from the moment of their acquisition of EMI in early February, we have made clear that their custodianship of this great company was always only going to be temporary.
"Over the last few months, we have been preparing for the moment when we would formally begin this process. Many of you have worked very hard indeed during that time to gather all the information necessary, and while there is still some work to be done, we're now at a point where we can feel comfortable that we're ready to go forward in as ordered and well-prepared a fashion as possible.
"So, how is this going to work? Normally there are three or four stages in processes like this. The first phase will involve engaging with and providing information about the company to potentially interested investors. After which, we will evaluate the investor interest and move into a more detailed diligence process. Simultaneously, we will be comparing and contrasting the various alternatives, including a sale, recapitalization or IPO. In the final phase, we will get into negotiating and executing on the desired alternative. If all goes according to plan that should mean that by Q4, we will have a good idea of who our new owners are likely to be. I will, of course, fill you in along the way on our progress...
"I know that some of you will welcome this news with some trepidation, but really you should not. EMI is a great business. It has an incredible heritage and an even more exciting future. We are optimistic about the music market, and have a clear vision for the future which builds on the strengths of both parts of our business. Working together over these last months has demonstrated that the Global Rights Management approach will deliver the growth we seek because it delivers better outcomes for our artists and songwriters.
"There will be a lot of people kicking the tires trying to figure out whether slicing and dicing the company will yield a higher value. But, we know that if you step back and see where we are going, where the alliance of these two businesses through Global Rights Management is taking us, the greatest value is in keeping the business together. That is why I believe that EMI will continue to be EMI for a very long time to come.
"So I welcome this next chapter in EMI's history. We will come through stronger and even more prepared to meet the challenges of the future, empowered to continue to build a new kind of music company that is focused on delivering for our artists and songwriters.
"Best wishes, Roger"