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Early Bids for EMI Raise Hopes for Citigroup

Andrew Edgecliffe-Johnson and Helen Thomas
Wednesday, 3 Aug 2011 | 2:06 AM ET

Bids for EMI suggest that the British music company could fetch more than $4 billion, allowing Citigroup to recoup about three-quarters of the money it lent to Guy Hands’ ill-fated private equity buy-out in 2007.

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People familiar with the matter suggested that first round preliminary bids from more than 10 groups had spanned a range from just over $3 billion to closer to $4 billion.

Some characterized a price tag of more than $4 billion as “aspirational” but said that the final price would depend on whether the business was sold as one, or split between publishing and recorded music.

The first-round bids, placed in the past few days, have raised expectations that the US bank that seized EMI from Mr. Hands in February could fetch more than the $3.3 billion Warner Music, its rival, was sold for this year, according to several people familiar with the auction.

Between four and six preliminary offers were for the whole company, these people said, with the rest split between bidders wanting only the recorded music business behind artists such as Coldplay and The Beatles, and others seeking just EMI Music Publishing, which holds the rights to 1.3 million songs.

The level of interest and availability of financing for the Warner Music sale bodes well for EMI’s auction, some industry advisers said. Warner Music in July completed a three-part debt offering, led by Credit Suisse and UBS , to fund the $3.3 billion buy-out by Access Industries, Len Blavatnik’s holding company. However, financiers added the caveat that funding package was signed before escalating fears over European debt and US public finances.

Early offers for EMI came from rivals including Sony , ­Universal , Warner Music and BMG—a music publishing joint-venturebetween KKR and ­Bertelsmann. Other unsuccessful bidders for Warner Music, including the Gores brothers, who run Gores Group and Platinum Equity, and Ron Perelman have also made offers, people familiar with the auction said.

BMG and Sony are widely believed to be focused on EMI’s publishing assets, while Warner Music could reap substantial benefits from combining the two recorded music companies. Analysts believe that Universal and Sony, the market leaders, would face tough regulatory scrutiny unless they offered substantial disposals.

Citigroup is expected to go back to preliminary bidders this week, beginning a process of due diligence that could change their calculations on the valuations of EMI assets. Bidders expect the bank to ask for ­second-round bids by the middle of September.

A sale for about $4 billion would recoup three-quarters of the £3.4 billion ($5.5 billion) Citigroup lent Mr. Hands in 2007. It wrote down the loans by £2.2 billion in February, leaving EMI capitalized with £300 million of cash and £1.2 billion of debt.

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