HITS Daily Double
"The Board of EMI has unanimously rejected the revised alternative proposal from Warner Music at 320 pence per share, and considers it to be wholly unacceptable."


These Puzzling Moves Beg the Question, What Is Bronfman and Company’s Game?
The mating dance between EMI and Warner Music has taken a strange turn, with revelations that the ownership of WMG has improbably rejected a dramatically enriched offer from EMI, while also turning the tables by making an offer to buy EMI. No, this isn’t April Fool’s Day.

EMI’s offer was for $4.6 billion, or $31 a share, $2.50 above the British company’s prior offer. The sweet deal was swiftly rejected, causing consternation across the business landscape.

It was universally assumed that WMG’s current owners, most of them venture capitalists, were in it for the short term, continuing their standard commando-raid pattern. The idea of Lee, Bain, Providence, et al. turning their noses up at such a handsome deal is puzzling, to say the least. "Today, it seems that conventional wisdom was wrong," a person close to the situation told Reuters. "It's clear that Warner rejecting the $28.50 offer wasn't just a negotiating tactic."

WMG’s counter-offer, for $4.6 billion in cash, was unanimously rejected by the EMI Board.

Whoa. This one ain't over yet. In fact, it may just be getting started...

The details were revealed today by a statement issued out of EMI’s London headquarters. What follows is the text of that statement.

June 28, 2006—Following this morning’s press speculation, EMI Group plc (EMI) is providing the following update to the market:

Since EMI’s approach, announced on 3 May 2006, to acquire Warner Music Group Corp. (Warner Music), EMI has been continuing actively to explore the potential acquisition of Warner Music, including in discussions with Warner Music and certain of its shareholders.

On 14 June 2006, EMI received an initial unsolicited alternative proposal from Warner Music to acquire all of the share capital of EMI for 315 pence per share in cash. The Board of EMI considered this proposal from Warner Music to be wholly unacceptable and unanimously rejected it.

Thereafter, on 23 June 2006, EMI made a revised proposal to Warner Music for EMI to acquire all of the outstanding shares of Warner Music for $31 per share in cash. EMI envisages that the proposal would be funded by debt finance and a rights issue, both of which would be fully underwritten, and the disposal of certain music publishing assets.

The proposal is pre-conditional on a number of matters, including due diligence. The Board of EMI believes an offer at this level is fully supported by synergy benefits available from the combination and that a transaction at this offer level would therefore deliver compelling value and earnings accretion to EMI’s shareholders.

Subsequently, on the evening of 27 June 2006, Warner Music informed EMI of its rejection of EMI’s revised proposal, and submitted to EMI a revised pre-conditional alternative proposal to acquire EMI at 320 pence per share, in cash. The Warner Music revised alternative proposal is non-binding and is pre-conditional, inter alia, on due diligence and a unanimous recommendation of the Board of EMI.

The Board of EMI has unanimously rejected the revised alternative proposal from Warner Music at 320 pence per share, and considers it to be wholly unacceptable, having regard to EMI’s prospects, the potential synergy benefits of a combination of the two companies and the range of strategic options available to EMI.

The Board of EMI continues to believe that an acquisition of Warner Music by EMI at $31 per share in cash would be very attractive to both sets of shareholders and would deliver value to EMI’s shareholders which is far superior to Warner Music’s revised alternative proposal. The Board of EMI is committed to pursuing such a transaction only if it delivers enhanced value and earnings accretion to EMI shareholders.

EMI will make further announcements as appropriate.

The Directors of EMI accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.

Warner Music has not approved the making of this announcement. There can be no certainty that an offer for EMI by Warner Music will be made or as to the terms on which any offer might be made.