Warner Music owner Len Blavatnik has pulled out of the bidding for the recorded-music piece of EMI at the 11th hour, leaving EMI unable to meet an internal weekend deadline to sell the home Katy Perry and Coldplay, The Post has learned.
Money seems to be at the heart of the breakdown.
The Blavatnik camp wouldn’t budge higher than their final offer of $1.5 billion, sources said, much lower than Citigroup was looking for.
Stephen Volk, vice chairman of the bank — which took control of the music label earlier this year after Guy Hands’ Terra Firma defaulted on its loan — and Blavatnik had been holding down-to-the wire talks but could not come to an agreement on price.
It could not be learned at press time if the talks were truly dead or if both sides were engaged in a high stakes game of chicken.
A rep for Blavatnik declined to comment, but one person familiar with talks said the company did not want to overbid because of EMI’s recent history, referring to the Hands default.
If it isn’t a game of chicken, Citi may just want to hold onto the recorded music piece until market conditions improve. Right now, lining up financing is frozen. With a thaw, Citi may get its price.
The Post has reported that music sales this year, after years of contracting, will see an increase in the US. As Pandora, Spotify and other streaming services gain footing, it could see a further boost — thus bring other bidders to the table.
There are other issues as well. For example, EMI’s pension liabilities are $600 million and, together with real estate commitments totaling $100 million, that sticking point is making EMI a tough sell.
The breakdown puts Citi in a tight spot. It had been negotiating exclusively with Blavatnik as recently as Friday, putting an attempt by Ron Perelman’s MacAndrews & Forbes to gain control of the music label on the back burner. Universal Music Group had also expressed interest in EMI.
It is not known if the sudden and surprise Blavatnik exit would open the door for Perelman and Universal to get back into play.
A Citi spokesman wasn’t immediately available.
Meanwhile, sales talks for EMI’s publishing business were proceeding much smoother.
There, an offer, believed to be about $2 billion from KKR and Bertlesmann-owned BMG, is said to be the likely winner in a two-horse race. A Sony-led bidding group is seen as nothing more than a dark horse candidate.