EMI calls off talks with Permira

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The Independent Online

EMI will face what looks to be a tough Christmas period alone after the music company said talks with the private equity suitor Permira had collapsed sending its shares crashing nearly 11 per cent.

It is the second tie-up to fall through this year after EMI's attempt to merge with rival Warner Music fell through in the summer. EMI has been courting Warner since 2000 but the latest set of talks were derailed after the European Commission annulled its clearance of the 2004 merger of Sony and BMG.

EMI revealed in late November that it had been approached about a potential offer for the business. Permira was behind the approach but the two companies have decided to abandon the takeover after failing to agree a price.

Permira was rumoured to be keen on a 320p a share deal that would value EMI at about £2.5bn and match Warner Music's bid earlier this year. EMI dismissed the approach, arguing that it had not received an offer that "fully reflects the prospects for and value of the company". Analysts said that EMI's management would have been pushing for a bid in the region of 350p a share.

Numis Securities analyst Paul Richards said that he was not surprised that talks with Permira had broken down as the private equity company could not justify a higher bid than Warner Music. It is estimated that a combination of Warner and EMI could yield up to $200m (£100m) in cost savings a year. "We are very much of the view that Warner and EMI will end up together," said Mr Richards.

EMI hopes that albums from the likes of Robbie Williams, The Beatles and Joss Stone will boost sales over the crucial Christmas period now that the takeover is off the agenda. However initial signs are not promising with a recent Woolworths trading update showing overall CD sales down 7 per cent in the months leading into Christmas despite lower prices.

Patrick Yau, an analyst at Bridgewell Securities, noted that Woolworths singled out sales of the new Robbie Williams album as being particularly disappointing and that January and February are historically weak months for CD sales. However arguments that weak trading over Christmas scuppered the Permira deal look wide of the mark as the company has not yet warned on profits.

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