Hostile bid possible after EMI calls off talks with Seagram

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The Independent Online
EMI, the British music group, abruptly terminated talks with Seagram, the Canadian drinks and entertainment empire, yesterday, little more than a week after announcing it was in talks. It said no offer had been forthcoming despite discussions "over several weeks".

Although EMI had never named the suitor, it is known to be Seagram, which owns the Universal/MCA business and has been looking to expand its music interests in Europe. It is understood that Seagram was seeking an agreed deal at around 610-615p, slightly higher than originally thought. EMI was looking for an offer of more than 700p.

EMI said that it was making the announcement to "put an end to the uncertainty and consequent speculation" which it considered as damaging to the interests of shareholders and employees.

"Despite discussions over several weeks, no offer has been received and the board has informed the third party that it is not willing to let the uncertainty continue," it said. It is understood there were no other potential bidders in the frame.

EMI took the decision after a board meeting on Thursday evening. Seagram was informed yesterday afternoon and given the opportunity to table a formal offer. After an hour none was forthcoming so EMI issued its statement terminating the talks. "Basically EMI was telling Seagram to put up or shut up," one analyst said.

It is possible Seagram will now launch a hostile bid, although this could invite an auction. EMI's share price stood at 573p yesterday, down 2p on the day, but EMI's statement was issued an hour after the market closed. Analysts estimate EMI's "bid-free" value to be around 468p-490p.

That means Seagram could come back with a hostile offer not far above its original figure. Credit Lyonnais Laing estimates that a single bidder might pay 630p for EMI, valuing the business at around pounds 5bn. An auction could send the price as high as 700p-750p.

EMI's announcement came just a day after PolyGram, the Dutch music giant, was effectively put on the block after Philips said it was considering options for its 75 per cent stake. Analysts said Seagram might now switch its attentions to PolyGram. They added that the timing of EMI's announcement might have been designed to achieve that end.

It is understood EMI executives have found the constant bid speculation an aggravating distraction. The company was forced by the Takeover Panel to issue a statement saying it was in discussions that might lead to an offer after its share price rose by more than 10 per cent on reports that Kirk Kerkorian, the US buy-out specialist, was interested in EMI. However it is understood that EMI had no contact with Mr Kerkorian and no offer was received.

EMI said yesterday that it remained "confident" about the prospects for the music industry. "Given its powerful position in both emerging and developed markets and the quality of its new management team, the board believes that EMI is in a strong position to exploit opportunities for developing shareholder value against a background of continuing industry change," the company said.