EMI seeks merger with MCA

Music group wants a US label - and a defence against hostile bidders. Richard Halstead reports

EMI, the music group which is home to George Michael and the Spice Girls, has approached Seagram about merging all or part of its business with the latter's MCA Music division.

The approach is understood to have initially met with a frosty reception from Edgar Bronfman Jr, chairman of Seagram, as it would have involved EMI buying MCA from Seagram, a business that Mr Bronfman has repeatedly said is central to his future plans for the Canadian drinks-to-entertainment company.

But it is understood that talks are still ongoing, and may lead to an agreed merger early in the new year, with Seagram assuming overall control but with key roles for both Sir Colin Southgate, EMI's chairman, and Jim Fifield,chief executive.

Any agreed deal would value EMI, which was demerged from Radio Rentals group Thorn in August, at pounds 6.5bn or more.

This weekend, EMI sources confirmed its ambitions to become a larger player in the US, where it currently holds 9 per cent of the record market, but said it would still prefer to be in charge of its own destiny. "We have an excellent distribution network in the US and the rest of the world," one source said. "What we need now is a talent-rich US label that perhaps does not have a worldwide marketing presence." MCA, the source added, "would be a good fit".

However the source insisted that many possibilities were still being considered, including a plan to take cross-shareholdings between MCA and EMI coupled with a joint worldwide distribution agreement. Another would be for EMI to set up a joint venture with Dreamworks SKG - the entertainment company headed by Steven Spielberg, David Geffen and Jeffrey Katzenberg - which distributed EMI artist George Michael's latest album.

At present, the global market for music sales is $40bn (pounds 24bn), of which 70 per cent is controlled by just five companies: EMI, Polygram, Sony, Warner, and Bertelsmann.

The talks between Seagram and EMI come as the prospect of a hostile bidder emerging for EMI grows with every fall in the share price. On Friday, the shares fell 47p to 1,331p in a weak market, well below the high of 1,488p reached in late September, which valued EMI at pounds 5.77bn. Disney and cable firm Viacom have previously been tipped as bidders.

"EMI have certainly not tried to make themselves bid-proof," said Dennis Exton, media analyst at Nikko Securities. "The shares are now priced below their enterprise value, and an opening hostile bid in the range of 1,450p a share is now a real possibility."

Analysts have pointed to Mr Fifield's pay package as a sign that they believe EMI's independent days are numbered. He will earn a bonus of pounds 4m next year if he meets share price and profit targets and has a pounds 12m "golden parachute" should he leave following a takeover

It is believed that talks would be more advanced but for Seagram's need to divest the parts of MCA - which it took over in a $10bn deal last year - that it does not want. It also has to rejig its finances to fund the price tag that EMI would attract.

The approach to Seagram is part of EMI's plans to enlarge its presence in the US market, which has been the weakest element of its worldwide music business.

In recent years the UK and Japanese markets have proven rich sources of artistic talent for EMI, but aside from its multi-million-selling album from its US act The Smashing Pumpkins this year and a few "emerging" acts, very little from its US offshoots EMI America and Capitol have proven worldwide smashes.

Start your day with The Independent, sign up for daily news emails
Sport
sportSo, how closely were you paying attention during 2014?
Arts and Entertainment
Dennis speaks to his French teacher
tvThe Boy in the Dress, TV review
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Arts and Entertainment
The Plaza Theatre in Atlanta, Georgia was one of the 300 US cinemas screening
filmTim Walker settles down to watch the controversial gross-out satire
Arts and Entertainment
Amy Adams and Christoph Waltz in Tim Burton's Big Eyes
film reviewThis is Tim Burton’s most intimate and subtle film for a decade
Life and Style
Mark's crab tarts are just the right size
food + drinkMark Hix cooks up some snacks that pack a punch
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect