Hands raises £250m to fund EMI overhaul
Tuesday 15 January 2008
Guy Hands has raised £250m in new equity to fund his planned shake-up of EMI and publicly moved to allay fears that the takeover of the struggling music company by his investment vehicle Terra Firma had run into trouble due to the credit crunch.
Mr Hands will detail EMI's restructuring plans today to EMI's staff, artists and managers and is expected to announce up to 2,000 job cuts in the company's recorded music division as well as a substantial slimming down of the company's roster of artists to focus on the most profitable acts. Only about 15 per cent of the artists on EMI's books currently make the company any money, according to Mr Hands.
The new funds – the largest co-investment round that Terra Firma has ever raised – enable the investment company to pay for the job cuts as it slims down the company's back office and marketing functions. The company is also expected to reveal that it intends to invest in EMI's artist and repertoire (A&R) operation, which acts as a link between the artists and the labels and also spots talent. It may also look to use the new funds to make acquisitions, specifically to bolster EMI's strong publishing division, but also potentially a few independent record labels.
The funds will also bolster EMI's balance sheet as it looks to meet its obligations regarding the £2bn loan facility with Citi, the US investment bank, that was put in place in July.
Mr Hands, who has been publicly criticised by artists and their representatives since he took over the music company in the summer, argues that the company is too bureaucratic. He has dismissed accusations that he has no understanding of the creative industries given his track record investing in pub and infrastructure assets.
He has also waved away suggestions that the £3.2bn takeout price for EMI was too expensive, arguing that the private equity company's most profitable investments have come when the market has accused it of overpaying.
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