Terra Firma extends EMI Group offer

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NEW YORK -- Private-equity firm Terra Firma said Thursday that it is extending its deadline for EMI Group investors to accept its £2.65-per-share takeover bid after the first deadline, as expected, passed Wednesday without Terra Firma reaching the necessary level of approval.

Meanwhile, Warner Music Group shares remain near their 52-week low of $14.08 as investors wait for word on whether that company will launch an eleventh-hour counterbid for EMI. The stock Thursday closed down 1.4% at $14.46.

Terra Firma said that its £2.4 billion ($4.79 billion) offer for the music company has been extended until the Fourth of July as holders of only 3.53% of EMI investors have so far accepted it. It's a one-week extension rather than the commonly used two-week increment; extensions are customary in these cases, especially when investors wait to see if a late counterbid comes in.

Terra Firma is looking to reach an acceptance level of about 90% among EMI shareholders for the deal to become binding, according to sources.

UBS analysts Ian Whittaker and Alastair Reid argued the shorter-than-usual one-week extension could be a strategic move on the part of Terra Firma. "We would see this as somewhat of a scare tactic to try to persuade EMI holders that time is running out in the absence of a counterbid from Warner Music," they wrote in a report.

Sources suggested that WMG could have about another month or maybe even more to make its intentions known if Terra's bid doesn't find majority support soon. However, with its stock under pressure, WMG is expected to update the market on its plans sooner rather than later.

EMI and WMG officials declined comment. A Terra Firma spokesman couldn't be reached.

WMG said earlier this month that it was still considering a rival bid. Sources said the firm is focused on deciding whether to make a last-minute bid for EMI now or offer to buy the EMI recorded music operations from Terra Firma down the line.

One source suggested that given the easier regulatory process, a Terra-EMI transaction could close within 3-4 months.

To make the much-longer expected regulatory review of a WMG-EMI deal attractive to shareholders and trump Terra Firma now, Wall Street analysts have estimated that WMG might have to offer closer to £3 a share.

"If Warner does come in with a bid, we expect it would have to be at least 290 pence to offset the potential regulatory risk associated with making a bid for EMI," Whittaker and Reid said.
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