Warner Music Group mulls sale, even as it considers buying EMI

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

Warner Music Group has set the ball in motion for a potential sale of the company, even as it considers a bid to buy rival EMI Music.

Warner has retained Goldman Sachs to vet a bid from private equity firm Kohlberg, Kravis & Roberts and potentially others, according to two sources close to the companies. KKR had approached Warner late last year about a potential deal.

Warner’s move, first reported Thursday in the New York Times, does not indicate that a sale is imminent, the sources said. Instead, it appears to throw everything up for grabs, thrusting the industry into a maelstrom of chatter about potential musical mashups.

One possible outcome is that Warner will shed some of its properties to raise money to make a run at EMI, according to a report from brokerage firm BTIG.

The current owners of EMI, Terra Firma, is struggling to meet loan payments to Citigroup, which lent the private equity group $4.2 billion to purchase the record company in 2007. Should Terra Firma default, Citigroup could initiate an auction to sell EMI and recover its loan.

EMI last year reported a $2.4-billion loss for its 2009 fiscal year due to write-downs related to the acquisition, even though its core music business generated $458 million in operating profit.

Warner, the only publicly traded major music label, posted a net loss of $143 million on sales of $2.98 billion in its fiscal year ended Sept. 30. A year earlier, it lost $100 million on $3.2 billion in revenue.

Shares in Warner shot up $1.29 Friday, more than 27%, to $6.01, as speculation that the company would be bought overshadowed news that Warner’s chief executive Edgar Bronfman, Jr., was convicted in a French court of insider trading while he was vice chairman of Vivendi in 2002. Bronfman said he would appeal the ruling.

-- Alex Pham