This has of course got nothing to do with ego. It could be argued that this is a business ruled by ego, from the stars it promotes to the business executives that count the money. You would need a harpoon gun if you wanted to catch some of the bigger egos swimming in the shark infested waters of the music business. It’s just that eminently logical merger of EMI and Warner Music seems to all boil down to which man will be the boss.
EMI has had its eyes set on buying up Warner Music for some time. The tale kicked off in 2000, when EMI wanted to buy Warner Music from its then parent company Time Warner, but competition authorities said no. But today it’s different. After all BMG and Sony’s music subsidiaries have pulled together to form the world’s second largest music publisher, and an EMI and Warner combo would still only be number three in global rankings of the industry, with Vivendi number one.
Chapter 2 of the EMI Warner saga took place in 2003, when the British company tried again, but were pegged when Warner Music was bought by Edgar Bronfman Jr, who along with his private equity backers owns 75% of the company today.
But then the pace quickened. May 3 saw Chapter 3 unfold, with EMI making a new $4.2bn bid for the smaller US company, which currently stands one place behind at fourth largest company in the industry. Their advantage is that they have a bigger share of the US market.
Two weeks later, and Warner turned the tables, and offered to buy EMI. Thus began Chapter 4.
Yesterday we saw a flurry of bids and counter bids, as first Warner upped its offer, and then EMI offered more for Warner. The Warner tactic is known as a Pacman defence, after the video game, in which the two adversaries try to eat each other.
If EMI is successful, then its boss, Eric Nicoli, will rule the new company. Mr Nicoli is a physicist, who armed with his scientific knowledge, worked in the food industry for most of his working life, before joining EMI.
Edgar Bronfman Jr on the other hand was, among other things, a songwriter who found himself owning his father’s company, Seagram, which he moved into entertainment before selling.
Who will be successful? The two sides each have their advantages and disadvantages. If EMI is successful, their bid will be funded by a £1bn rights issue, and the sale of the Warner subsidiary publishing business, Warner/Chappell.
The Warner bid will be funded by debt. Bronfman has done a good job for Warner so far. Will his backers feel that his success to date will merit even greater backing, or will they want to get out, while the going is good?
But as the frenzy of activity mounts, the markets expect to see many more chapters unfold. The current Warner share price is still above the level EMI most recently offered (although the offer carries a 40% premium on the price earlier in the spring). Most expect the British company that represents artists including Robbie Williams and the US firm, which boasts Madonna on its books, will merge. Let’’s hope we haven’t reached Chapter 11 by then.
For further information
Edgar Bronfman, JrWikipedia
EMI rejects Warner takeover bid BBC
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