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.

PROMOTED VIDEO
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film Ridley Scott reveals truth behind casting decisions of Exodus
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
Arts and Entertainment
Roisin, James and Sanjay in the boardroom
tvReview: This week's failing project manager had to go
Life and Style
Fright night: the board game dates back to at least 1890
life
Life and Style
fashion
News
ebooksNow available in paperback
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

Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

£16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

£35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

Citifocus Ltd: Operational Risk Analyst

£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

Day In a Page

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?
Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

24-Hour party person

Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
Michelle Obama's school dinners: America’s children have a message for the First Lady

A taste for rebellion

US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches