EMI Draws Another Suitor

Not so long after ending talks with Permira and Warner Music Group, EMI is back for another spin on the buyout market.

The Financial Times reports on Friday that One Equity Partners, a private equity affiliate of J.P. Morgan Chase, has approached EMI with a takeover bid of more than $6 billion.

If Warner's $4 billion March bid is any indication, $6 billion seems like an awfully rich price to pay for the music company, which is currently valued at $3.62 billion.

EMI's recent performance has not been promising. This year the company has already cut is profit and revenue forecasts twice, announced a 15 percent drop in revenue, and suspended its dividend.

Further, the music market as a whole is in dire straights as digital downloads and illegal file sharing take increasingly large digs into sales revenue. U.S. music companies saw album sales fall by 17 percent in the first quarter of 2007, and it's a trend that doesn't appear ready to reverse anytime so

To top it off, EMI is seriously considering securitizing its music library to make an asset-backed debt offering sometime in 2008. Private equity firms aren't generally keen on perusing cash-starved targets, so that extra leverage should make it even less attractive.

It's hard to see what justifies the hearty premium being offered by One Equity.

by Liz Gunnison