Warner Music is in talks with more than one private equity firm about a potential break-up bid for EMI ahead of next Thursday's put-up or shut-up deadline. Hopes of a counter bid by Warner have been fading in the weeks since EMI agreed to a £2.4bn bid by private equity firm Terra Firma pitched at 265p a share.
Terra Firma yesterday gave EMI shareholders an extra week to accept its offer after receiving support from holders of less than 4pc of the shares. Analysts say Warner would have to pay more than 300p for a knock-out bid because of the regulatory uncertainty.
The US record company wants EMI's recorded music division but has yet to agree a deal that would see private equity fund the purchase of its UK rival's music publishing assets.Warner would be prevented by regulators from keeping the publishing business but believes it could get regulatory clearance to buy the recorded music arm.
Warner share price has come under severe pressure and with debt markets tightening and Wall Street analysts increasingly bearish over the prospect of a Warner bid.
Richard Greenfield at Pali Research said in a note this week: ''With our 2008 music industry outlook increasingly gloomy, we believe the risks associated with a 300p-320p all-cash bid by Warner for EMI are rising. It is unclear whether Warner has the support of its private equity owners to actually make a bid at all.''
The struggling US recorded music industry has improved modestly in the past few weeks but revenues continue to decline. Warner has been asked by the Takeover Panel to show its hand by next Thursday. If it does not launch a counter-bid, it is expected to seek to buy EMI recorded music from Terra Firma at a later date. Warner declined to comment.
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