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Warner considering acquisition and sale at same time

By | Published on Friday 21 January 2011

Warner Music Group

According to reports, Warner Music Group has appointed the well-bonused bankers of Goldman Sachs to look into two possible futures for the US-based music company, one where it buys EMI and doubles in size, and another where the firm’s current owners sell out and let someone else run the shop, most likely BMG owners KKR.

According to New York Times, Warner has brought in the no doubt well-suited if slightly tedious bankers after management there were approached by at least one third party, maybe more, about buying the company, or at least its publishing business, Warner Chappell. It is known the equity group which owns half of BMG – KKR – has expressed an interest in at least beginning takeover talks. They, of course, are also a favourite to buy half of or all of EMI if and when that goes on the block later this year.

The other much mooted bidder for some of EMI is Warner itself, and reports say another team of Goldman Sachs consultants are looking into that option, and have already spoken to Citigroup, EMI’s multi-billion dollar money lender, which may take ownership of the London-based music firm later this spring if and when current owners Terra Firma confirm they are no longer able to prop up the music company so that it can meet its loan covenants with the US bank.

So, buy or be bought then. Although the two strategies seem to contradict, the fact both are being pursued at the same time suggests that the private equity types which backed Edgar Bronfman Jr’s acquisition of the Warner music company back in 2004, and who still own a big chunk of the now publicly traded company, are getting itchy feet, and either want radical growth or out.