Struggling British music group EMI has accepted a £2.4 billion ($4.7 billion) buyout bid from UK private equity firm Terra Firma Capital Partners. Not previously mentioned among EMI’s potential buyers – thought to include JP Morgan’s One Equity Partners, Fortress Investment Group and Cerberus Capital Management – Terra Firma reportedly entered its bid hours before Monday’s auction deadline.
“The EMI board received a number of proposals from several different parties,” EMI chairman John Gildersleeve said in a statement. “Terra Firma’s offer is the most attractive proposal received and delivers cash now, without regulatory uncertainty and with the minimum of operational risk to the company.”
Terra Firma agreed to pay 265 pence per share in cash. Greenhill, Citigroup and Deutsche Bank are providing financial counsel to EMI, while Dresdner Kleinwort is advising Terra Firma.
“Terra Firma’s objective is to build on EMI’s current position as one of the world’s leading music companies and accelerate the development of its digital and online strategy to fully exploit this long-term growth opportunity,” Terra Firma founder, Guy Hands, said in a statement.
EMI and rival, recurrent suitor Warner Music attempted to merge in 2000 and 2003, but were prevented by regulators both times; last year they abandoned plans to buy one another following a European Court ruling on the merger of Sony Music and BMG. More recently, Warner offered in February to buy EMI for 320 pence per share, or £2.1 billion, but the bid was rejected.
Private equity firms have also been courting EMI since at least late last year. In November, Goldman Sachs and Kohlberg Kravis Roberts reportedly approached the company with a potential £2.5 billion bid that failed to materialize, while talks with Permira regarding a similarly sized deal collapsed in December.
Large media groups with global brands are attractive private equity targets. Warner itself was taken private for $2.6 billion in 2004 by a consortium led by Edgar Bronfman and including Thomas H. Lee Partners, Bain Capital and Providence Equity Partners. The company filed for an IPO one year later.