Southgate rules out demerger of rental and music businesses: Disappointed traders mark down Thorn EMI shares

SIR COLIN Southgate, chairman of Thorn EMI, yesterday disappointed the City by ruling out an immediate demerger of the group's rental and music businesses.

Sir Colin told shareholders at the annual meeting in London: 'In continuing further to develop EMI, Thorn and HMV, the current group structure is a positive advantage and adds significant value.'

He said directors had just completed their annual review of strategy and had concluded that 'the immediate challenge is to capitalise on the excellent prospects which now exist for our businesses.' It will continue to expand the three divisions by organic growth and acquisitions.

Sir Colin sparked speculation about a demerger when he said in May that he would consider a split if it would enhance shareholder value. He said it would only be considered once Thorn had completed its disposal programme.

It has since sold its security business and its stake in Babcock Thorn. Sir Colin said that discussions on the remainder of its electronics businesses, which would complete the disposal programme, were continuing.

The City hoped an announcement on demerger was imminent and has marked the shares up from 998p to 1,074p in the last two weeks. Yesterday they rose a further 9p to 1,083p before falling after Sir Colin's statement. They closed 9p lower at 1,065p.

A demerger is seen as attractive because it could unlock the value in the music business, which has enjoyed strong growth over the last decade.

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