EMI halts fall in music sales

EMI has stabilised music sales amid a still-falling market, the company reported, as it confirmed that it had made a "firm" merger offer for Time Warner's music business.

The group's shares closed up 6 per cent at 179.25p as its half-year results beat market expectations. On the merger talks, EMI's chairman, Eric Nicoli, said: "Those discussions have progressed well and are at an advanced stage."

The company faces competition for the Time Warner music interests from private equity players, including a consortium of media tycoons including Edgar Bronfman Jr and Haim Saban. EMI will also have regulatory hurdles with any tie-up.

Mr Nicoli said: "We would not have made a firm proposal if we didn't think we had good prospects." EMI said: "We have made a firm proposal to Time Warner which, we believe, would create substantial value for the shareholders of both companies. As soon as we are able, we will make a further announcement. It would be inappropriate to say more at this time."

It is thought that the proposed transaction would involve offering Time Warner cash and shares worth more than $2bn (£1.2bn), including a stake in the enlarged music business of some 25 per cent. Synergies from the tie-up are estimated at some $300m.

EMI's group turnover was flat at £960m, as was turnover in the recorded music division at £758m, for the six months to the end of September. The industry as a whole saw revenues drop more than 10 per cent for the period. EMI saidthe rate of industry decline should slow in the second half, to between 5 and 8 per cent contraction.

Analysts at Numis, the broker, said: "EMI is dramatically outperforming its peers with flat recorded music sales compared to double-digit industry-wide declines.... EMI produced an astonishing performance, with sales flat, aided by carry over from Norah Jones (16 million units) and Coldplay (8 million)."

Operating profits for the first half came in at £79m, up 1 per cent. Adjusted pre-tax profits fell to £39.4m from £42.2m, due to increased interest charges.

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