Bronfman rules out EMI bid

Edgar Bronfman, whose consortium has beaten EMI to buy Warner Music, yesterday dashed hopes that he might bid for the British company next.

Although EMI shares dropped last week on the news that Mr Bronfman's team was the preferred partner, the stock was supported to some extent by the belief that the media tycoon would use his winning company as a vehicle for industry consolidation. EMI was seen as the most likely target.

However, Mr Bronfman said yesterday that he would not make further acquisitions and questioned the whole logic behind mergers of music majors. EMI has twice tried to merge with Time Warner's music arm and once with Bertelsmann's music business.

EMI formally withdrew its cash and shares offer for Warner Music yesterday morning. In the afternoon, Time Warner announced it was selling the division to a consortium led by Mr Bronfman for $2.6bn (£1.5bn) in cash. EMI is thought to have offered $1bn in cash, plus 25 per cent of the enlarged business.

Mr Bronfman told The Independent: "This is step one of a one-step plan. I have no plans to bid for any other company."

He added: "Mergers will not solve anything for the industry right now. When mergers are done for the whole purpose of reducing costs, that's not a strategy I would pursue."

EMI's acquisition of Warner Music was predicated on cost-savings, reckoned to be as high as £200m a year.

Mr Bronfman, who sold his family's industry-leading Universal music business to Vivendi in a disastrous deal, teamed up with three private equity firms for the Warner deal: Thomas H. Lee Partners, Bain Capital and Providence Equity Partners. The transaction allows Time Warner to buy up to 19.9 per cent of the new music group at an unspecified price over the next three years.

Scott Sperling, managing director of Thomas H. Lee, said that, after another couple of difficult years, the industry should grow again. He also agreed that the sector was wrong to see consolidation as the panacea for its problems. "Scale or size is not the significant differential," he said. "It's a focus on artists and having a very good management team."

For its part, EMI said it was not in the interests of shareholders to have tried to pursue the Warner deal any further, and pointed to its recent financial figures, where it outperformed the industry. EMI's artists include Robbie Williams and Norah Jones.

Omar Sheikh, an analyst at Charles Stanley, said: "EMI is now looking at two or three years more of decline. It needed a cost-cutting merger to keep earnings moving along."