WMG pondering $750m offer for EMI Music

TELL US IF YOU’VE HEARD THIS ONE BEFORE: Warner Music is contemplating a $750 million bid for EMI's recorded music division, Britain’s Observer reported Sunday morning. Wall Street sources say it could be lodged with Terra Firma within weeks. Although Guy Hands says he isn’t interested in a sale, the Terra boss is under pressure from Citigroup to do a deal. Citi is said to support a sell-off of EMI's recorded music division to WMG as part of a debt-reduction program. Under another scenario, Citi could offer to cancel debt in return for taking control of EMI Music Publishing, which is valued at more than $2 billion. If that happened, Hands would be free to look at a merger of EMI’s and Warner's recorded music assets to create a new industry heavyweight. Said Paul Richards of Numis Securities: "I always assumed the recorded music operations of EMI and Warner would be merged; on their own they are much smaller than those of Universal and Sony, but together they would create a business with substantial scale." In the next few weeks, Hands and Citigroup are expected to sit down to negotiations. "Citi want a debt-for-equity swap that would put them in the driving seat," said one banker. Hmm... It appears that Hands and the Citi brass didn't read Roger Faxon's memo. (11/15a)