EMI backs Terra Firma bid


LONDON -- EMI Group has recommended that its investors accept a cash offer for the company from European private-equity firm Terra Firma, for £2.65 ($5.22) per share.

The sum, offered through Maltby, a newly incorporated company formed by Terra Firma, values the music major on an enterprise value basis at £3.2 billion ($6.3 billion), and values the entire issued and to-be-issued share capital of EMI at about £2.4 billion ($4.7 billion).

EMI's board said that it considered the offer to be "fair and reasonable" and that it intends to "recommend unanimously" that EMI shareholders accept the proposal.

Following the announcement, EMI shares soared about 10% in trading on the London Stock Exchange to £2.71 ($5.34).

EMI chairman John Gildersleeve described the offer as "attractive" when stacked against the other offers on the table, believed to include one from long-term suitor Warner Music Group. Private-equity firms Fortress, Cerberus and One Equity also were understood to be among the interested parties.

"The EMI board received a number of proposals from several different parties," Gildersleeve said. "Terra Firma's offer is the most attractive proposal received and delivers cash now, without regulatory uncertainty and with the minimum of operational risk to the company."

Gildersleeve added that EMI remains in good shape, but its support for an outside offer was meant to safeguard the company's future.

"The global music industry is undergoing significant change and, whilst EMI is confident in its ability to deliver its recently announced restructuring plans, significant uncertainty exists as to the timing and extent of future market developments," he said.

Added Terra Firma CEO Guy Hands: "Terra Firma's objective is to build on EMI's current position as one of the world's leading music companies and accelerate the development of its digital and online strategy to fully exploit this long-term growth opportunity." Terra Firma claims to have invested more than €7 billion ($9.4 billion), mainly in Europe, since 1994.

EMI has been advised in the process by Greenhill. Greenhill, Citi and Deutsche Bank are acting as joint financial advisers to EMI, the label said. Dresdner Kleinwort will serve as financial adviser and corporate broker to Terra Firma.

EMI's surprise announcement was issued simultaneously with the company's financial full-year report, with EMI's core divisions -- EMI Music and EMI Music Publishing -- both confirming revenue declines. EMI's preliminary results were not expected to be issued until later in the week.