EMI single races into Hot 100

Click to follow
The Independent Online
EMI Group, the demerged music company that was formerly part of Thorn EMI, is expected to see its market capitalisation race tomore than pounds 6bn in early trading when the shares make their debut on the Stock Exchange tomorrow.

However, investor caution will mean that Thorn plc and EMI Group will start life at a discount to the value of their deceased parent, which closed its stock market career on Friday with a spurt of 35p to pounds 18.25.

Market-makers expect EMI to open at around pounds 14 a share, valuing it at pounds 6bn. The shares are predicted to find plenty of buyers in the market in anticipation of a bid emerging from the US for the world's only remaining independent music business of any size.

Potential bidders include Sony, News Corporation, TimeWarner and Dreamworks, the media company set up by Steven Spielberg. But analysts expect the strongest interest to come from Seagram, owners of the MCA film and music conglomerate. "Seagram can achieve immediate synergies with EMI and MCA, and without the danger of anti-trust action," said one analyst. He added: "With the others, I really don't see where the savings will come from. It's going to be an expensive buy.".

The market believes that any bidder for EMI will have to stump up between pounds 16.50 and pounds 18 a share, which at the top end would value the company at close to pounds 8bn, or more than the combined Thorn EMI business was worth before the demerger.

A successful bidder for EMI would get access to the world's most lucrative collection of music-based intellectual property, including all of the Beatles recordings. The band's first full retrospective album, Beatles Anthology Volume One, was the company's bestseller last year with nine million sales worldwide. In addition, the company has a few hot acts of the moment including Blur, the Smashing Pumpkins, Supergrass and Garth Brooks, the US country-music singer.

Thorn, meanwhile, will open at 410p. The company, whose assets include Radio Rentals and Crazy George, the appliances rent-to-buy chain, has been left in the shade by the more glamorous EMI, but institutions have lately come out in support, citing the business's good cash-generating qualities.

Both will be included in the FTSE-100 list of Britain's largest companies, with Cookson, the conglomerate, being relegated to the junior Mid-250 index to make way for Thorn. "There was a wave of selling in Cookson when the fund managers realised it might drop out of the index, so it became a sort of self-fulfilling prophecy," said one analyst.