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Nov. 12 (Bloomberg) — Citigroup Inc. agreed to sell EMI Group’s recorded music and publishing businesses in separate transactions for a combined $4.1 billion.
Vivendi SA’s Universal Music Group will buy EMI’s record labels, home to Katy Perry and Coldplay, for 1.2 billion pounds ($1.9 billion), and a Sony Corp.-led group that includes billionaire David Geffen will pay $2.2 billion for the publishing unit, according to statements yesterday.
The breakup of London-based EMI, the 114-year-old music company that owns Abbey Road Studios, sells Beatles albums and publishes songs written by the late Amy Winehouse, ends a nine- month bidding war. Citigroup, the New York-based lender, seized EMI in February after investor Guy Hands fell out of compliance with loan covenants.
“The two companies coming in to buy the asset know the music industry well; they’re not going to have any false pretenses about what will or won’t happen,” said Ben Rumley, an analyst at Enders Analysis in London. “We might be getting close to the point where the decline, in the recorded side at least, is ending.”
The auction had a surprise ending, with the two winning bids outstripping rivals who had been in the lead for much of the process.
Warner Music Group, owned by billionaire Len Blavatnik, offered $1.5 billion to $1.6 billion for EMI’s recorded arm, people with knowledge of the situation said last month. Sony was vying with BMG Rights Management GmbH, the music company controlled by KKR & Co., which had bid $1.8 billion to $2 billion for publishing, people said then.
Uncertainty in credit markets worked in Sony’s favor, because the private-equity suitors rivals for the publishing business depended on higher debt leverage and could extract fewer cost savings, said Rob Wiesenthal, chief financial officer of the Tokyo’based company’s U.S. unit.
“It accrued to our advantage,” Wiesenthal said in an interview. “While credit markets fluctuated, we were able to secure soverign entities, which are long-term holders.”
The Universal transaction values EMI’s recorded-music arm at about seven times earnings before interest, taxes, depreciation and amortization and before synergies, Paris-based Vivendi said in a statement.
Citigroup, based in New York, agreed to assume liability for employee pensions and any litigation with Hands’ Terra Firma Capital Partners, said two people with knowledge of the talks. Universal Music will assume all risk related to regulatory approval, said the people, who weren’t authorized to talk publicly.