March launch for demerger of Thorn EMI

Getting better: Beatles release boosts prospects as pre-tax profits surge to pounds 179m
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The Independent Online
MATHEW HORSMAN

Media Editor

The Thorn EMI demerger will be launched by next March. Sir Colin Southgate, chief executive of the music and consumer goods retailer, said yesterday that the plan to divide the music and rentals businesses, likely to cost pounds 100m in tax and advisers' fees, would be the "most efficient and cheapest [demerger] in living history".

Responding to criticisms that the company had not revealed enough information about the demerger plans, he advised shareholders and analysts to be patient. "The sheer administration is huge, and the paperwork is mind-blowing. We need to have everything audited and checked: it's just a huge structural exercise if we are to make it work."

The chief stumbling block will be winning favourable tax rulings in the 27 countries in which the company operates. The plan is to hive off the rental business under the name Thorn plc, leaving the music business with the company's retail operations, including Dillons, the high street bookseller, and the HMV music shops.

Analysts value the demerged companies at about pounds 7.5bn, compared with a market capitalisation yesterday of about pounds 6.5bn. They repeated yesterday that the company remained a possible bid target, with US entertainment giant Disney the favourite.

Lack of information about the demerger, along with half-year profits at the mid-point of analysts' expectations, helped send the company's shares down slightly in light trading yesterday. The shares fell 24p to 1,523p, against estimates following demerger of about 1,700p a share.

Brokers suggested there had also been profit-taking on the stock's recent rise.

The next quarter, which includes Christmas, is expected to be boosted by record sales of the new Beatles Anthology, launched this week.

It includes a remastered song by John Lennon, to which the three surviving Beatles have added harmonies. New titles by Queen and Garth Brooks are also likely to perform well.

Pre-tax profits for the six months to September jumped 44 per cent to pounds 179.7m, on turnover ahead 15 per cent to pounds 2.2bn.

Sir Colin said the all-important Christmas season looked promising both in the US and in the UK.

Investment Column, page 26

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