Chrysalis rejects EMI takeover offer

Chrysalis rejected a 155p-a-share offer from EMI yesterday, sending shares in the music group down nearly 15 per cent to 115p.

The music publisher, whose catalogue includes Gnarls Barkley, David Bowie and the current number one hit singer, Estelle – said the proposal was unanimously rejected by the board because it "significantly undervalues" the business.

Discussions with potential suitors have been on-going since the end of last year, and although Chrysalis has refused to confirm the identity of the bidder, it is widely understood to be EMI.

Chrysalis, which sold its radio division to Global Radio for £170m last July, is blaming the credit crunch for the lack of suitable offers. "The position of potential buyers and current valuation levels have been negatively impacted by global economic and credit market conditions and specific issues affecting the ability of some industry buyers to participate," it said.

But analyst valuations of the company, at around 230p per share when the second round of talks started in February, are likely to have been significantly affected by revised forecasts. The latest estimates, published yesterday, expect half-year sales to be 10 per cent lower than in 2007 because of a quiet release schedule at the start of the year and the impact of the Hollywood writers' strike. Uncertainty over the company's future ownership has also affected its ability to sign new artists, it says.

Following the collapse of the talks, the company will focus on restructuring the core business to improve efficiency. Chris Wright, the founder and 27 per cent shareholder, is to act on a part-time basis, and review the potential sale of non-publishing assets.