EMI leans toward private equity
Former CEO Fifield withdraws from bidding processNEW YORK -- EMI Group Plc. urged shareholders Wednesday to accept a takeover offer from private-equity firm Terra Firma by the latest deadline Thursday as the last potential bidder folded his cards, and EMI said it doubted he ever was a serious suitor.
Former EMI recorded music CEO Jim Fifield said Wednesday that he does not intend to make an offer for EMI that would rival Terra's £2.65-per-share bid. Fifield's statement came a day after Warner Music Group, led by chairman and CEO Edgar Bronfman Jr., said it would not try to trump Terra's £2.4 billion ($4.9 billion) cash offer.
WMG shares continued to rise Wednesday as investors, who had feared an expensive and dilutive deal cheered the news.
Pali Research analyst Richard Greenfield upgraded the stock from "sell" to "neutral." In a report, he cited that WMG shares are down 40% year-to-date, compared with the S&P 500's 9% increase.
"They made the correct decision vis-a-vis EMI," he argued in a report. "Buying EMI would have been far too dilutive to WMG shareholders and created too much financial risk (due to leverage)."
WMG shares closed up 9% at $15. It was Wednesday's biggest gainer on The Hollywood Reporter's Showbiz 50 stock index. During the past year, they have traded from $13.17-$27.24.
In London, EMI shares fell 2% to £2.62 ($5.38).
Fifield said Wednesday that his withdrawal was a result of the timetable imposed by the Takeover Panel, a U.K. body that supervises acquisitions. It had set a noon London deadline today for counter offers.
However, EMI said its board "has serious doubts about that suggestion (that the time constraints hurt his efforts) and the credibility of any possible offer" from Fifield.
The music firm highlighted how it said in early May that it had received a number of indications of interest, with several potential bidders then starting a due-diligence process.
"Fifield did not participate in such process, nor did he or his financiers seek to participate," EMI said. "At no stage has Mr. Fifield made any proposal regarding a possible offer for EMI."
The company also said that Fifield did not make any contact with EMI between announcing his interest May 25 and Tuesday.
EMI also said that it continues to find Terra Firma's offer to be "fair and reasonable." As a result, its board continues to recommend unanimously that EMI shareholders accept the offer.
"EMI shareholders are encouraged to accept the offer as soon as possible and no later than 1 p.m. (London time) on the closing date of 19 July," it said.