Deals and IPOs

Sony Secures Abu Dhabi Funds for EMI Bid

Andrew Edgecliffe-Johnson and Helen Thomas in New York and Salamander Davoudi in London

Sony has secured financing from Abu Dhabi’s investment fund for EMI as second-round bids for the U.K. music company came in before a deadline last night, people close to Citibank’s $3.5-4 billion auction said.


Financial support from Mubadala, the Abu Dhabi investment fund, and Raine, the media investment bank, backed by Hollywood talent agent Ari Emanuel, could put Sony on a more equal footing with bidders including BMG Music Publishing, Ronald Perelman’s MacAndrews & Forbes group, Universal Music and Len Blavatnik’s Warner Music .

The Japanese electronics group reached the last stage of this year’s auction for Warner Music, but lost to Mr Blavatnik’s Access Industries as it struggled to lock down approval from its board in Tokyo and the estate of Michael Jackson, its partner in the Sony ATV music publishing joint venture.

Sony declined to comment. Sony ATV has been expected to target EMI Music Publishing, valued at $2-$2.5 billion, but Sony Music, its recorded music business, was said to also be looking at EMI Music, the record label business expected to fetch $1.1-$1.5 billion. Mubadala, established to help diversify Abu Dhabi’s economy away from its dependence on hydrocarbons, invested in Raine. Neither company could immediately be reached.

BMG, the joint venture between Bertelsmann of Germany and Kohlberg Kravis Roberts , the private equity group, is seen by many industry members as the frontrunner for EMI Music Publishing. BMG declined to comment, but it is understood to have put in its offer on Wednesday. It was not immediately clear whether BMG had bid for the whole company or only for music publishing.

Warner Music, seen as the frontrunner for EMI’s recorded music assets because of its decade-long pursuit of its U.K. rival, and the savings a combination could yield and its new owner’s deep pockets, would not comment. However, two people said it could submit separate bids for EMI Music and for the whole group.

EMI’s management has argued for keeping the company’s two halves together, but people close to the bidders believe Citigroup , the lender that seized control of EMI from Guy Hands’ Terra Firma private equity group in February, would split the group to secure a higher price.

MacAndrews & Forbes started the auction looking only at EMI’s record labels, but could bid for the whole group, people close to the process believe. Universal Music, the Vivendi-owned market leader, declined to comment but is expected to bid for EMI’s recorded music business and make disposals should regulators demand them.

The auction’s final hours were clouded by bidders’ uncertainty about a pension deficit that would sit with EMI’s recorded music business if the company were split. Bidders have been advised that the maximum exposure could be £400 million.

Some suitors’ financing packages were still being finalized on Wednesday, with bidders playing banks off against each other to seek better terms in a difficult credit market. Bank of America is understood to have stepped back from financing EMI bids, while banks including JPMorgan are understood to have adopted a more conservative view in recent weeks on the earnings multiple at which they will lend.