The long and winding road: Citi completes EMI sale

Citigroup has completed its two-part disposal of iconic music publisher EMI, home to the Beatles, after selling its recorded music and publishing units for a combined £2.6bn.

Citigroup, which took control of EMI in February from buyout group Terra Firma Capital Partners, has managed to recoup more of its losses on the business than analysts had predicted, leaving it about £900 million down overall. Relative to where the bank marked the assets, the sales result in a gain for Citi according to a source with knowledge of the situation. Citi declined to comment.  

On Friday, it agreed the two-part disposal of the business. In the first stage of its exit, it sold the recorded music division, which counts artists including Coldplay and the Beatles amongst its roster of talent, to Universal Music Group, a subsidiary of French media business Vivendi. At £1.2 billion, the deal value surpassed many analysts’ predictions. It also still remains subject to a series of regulatory approvals, the parties said in a statement.

In addition to the sale of the recorded music division, Citi also announced the sale of EMI Music Publishing to a Sony-led consortium later on Friday.The Sony consortium faced competition from a rival bidding group comprising media group Bertelsmann and Kohlberg Kravis Roberts, but outbid its rival with a £1.4 billion offer. Partnering Sony in the deal were Blackstone affiliate GSO Capital Partners, the estate of deceased pop star Michael Jackson, Abu Dhabi state-backed investment vehicle Mubadala Development Company PJSC, Jynwel Capital, and record executive David Geffen.

Commenting on the sale to UMG, EMI chairman and Citi vice chair Stephen Volk, said: “We believe that this transaction accomplishes Citi's objective of maximising the value of EMI, giving EMI Music a partner in Universal Music that appreciates EMI’s rich cultural legacy, its incredible stable of musical talent, and its employees who work so hard to deliver successful outcomes for the artists they represent. We are grateful to Roger Faxon, his management team and all of EMI’s staff for the continued success of this business during Citi's ownership.”

The sales bring to a close a tumultuous relationship between Citi and EMI. Citi provided debt to fund Terra Firma’s acquisition of the business in 2007 for about £4 billion, split between £1.5 billion of equity and a £2.5 debt package, later increased to £3.4 billion.
 
It transpired that the debt was placed in the bank’s troubled loans unit the day the deal completed. Three years later, Citi seized control of EMI, alleging Terra Firma had missed interest payments on the debt. Terra Firma has since brought a series of legal actions, hitherto unsuccessfully, against Citi.