bloggingbuyouts

Following Tuesday's announcement that Warner Music Group (NYSE: WMG) had dropped its plans to make a bid for London-based EMI Group PLC (LSE: EMI), Billboard.com reported yesterday that former EMI CEO Jim Fifield and Bidco, a firm backing any potential offer by him, had also dropped plans to acquire the English music giant. Like WMG, they still retain a six month window to make an offer.

EMI has reportedly contacted shareholders and reaffirmed the board member's commitments to the May offer from European private equity firm Terra Firma for 265 pence per share. That bid now sits higher than the closing price of EMI shares yesterday, 261.75 pence, five pence below Tuesday's closing price. Between July 5 and 12, EMI had enjoyed a boost rising well into the 270s, but the stock fell after a third deadline announcement by Terra Firma. Announcements by Warner and Fifield about dropped plans to counterbid for the company have obviously hurt the stock even more.

In addition to stock deceleration, another report on by Billboard.com yesterday indicated that in physical and digital sales of music last year, EMI accounted for only 12.8% of combined sales. WMG accounted for 13.8% which means a combined WMG-EMI company only a 0.9% lead over industry leader Universal Music Group's 25.7%, and just 0.1% over all independent music labels. One has to wonder if EMI's large steps this year into the digital world will make any lasting dent in the company's sales.

Billboard.com announced yesterday that the Warner Music Group (NYSE: WMG) has dropped plans to make a counterbid for London-based EMI Group PLC (LSE: EMI) by the deadline on Thursday, but will still retain the right to make an offer within the next six months. The only other potential bidder left to reply to the Thursday deadline now is former EMI CEO Jim Fifield.

This announcement is only the second official indication that WMG was even interested in making an offer for EMI following European private equity firm Terra Firma's offer in May. If WMG had decided to make an offer before Thursday, it would have been the second time since last year and only the most recent in a seven year game between the two music giants. It was speculated that the deadlines made for Terra Firma were because EMI shareholders were waiting for a move by WMG, while the firm had only gained around 4% of EMI shares by last Thursday. The previous bid from WMG for EMI was 315 pence per share, which was rejected (Terra Firma's 265 pence offer was approved and recommended by EMI heads, primarily because it had a higher probability of being approved by the European Commission -- which it was last week).

Despite the announcement (or in reaction to it), WMG shares rose slightly yesterday, closing at $13.77, up from $13.76 on Tuesday. EMI on the other hand, continued its fall, dropping another .13 pence to close at 266.37 pence. Trading in London for the day had brought the price as low as Terra Firma's bid of 265 pence, before rising to close slightly lower than Tuesday.

According to the Associated Press, Warner Music Group (NYSE: WMG) and former EMI Group PLC (LSE: EMI) CEO Jim Fifield have until Thursday to make an offer for the London-based music company. That date is the most recent extended deadline for a deal between EMI and private equity firm Terra Firma to be completed, and the report indicates that "many analysts believe Warner Music will trump Terra Firma's offer with a higher one."

The Terra Firma offer, set at 265 pence, or roughly $5.30, is significantly lower than a previous WMG offer from over a year ago: 315 pence. Additionally, EMI stock had enjoyed a boost since July 5, but after the announcement that the European Commission had approved the deal, the stock dropped again. Yesterday, EMI stock continued to fall, closing at 266.52 pence, down another 3 pence from Friday. Shareholders hoping WMG might make a counter bid to Terra Firma are certainly seeing their hopes and the price fall back to near the offer price.

If WMG does make an offer like analysts predict, it seems unlikely that it will be as high as 315 pence, but other rumors in the past few months have quoted 285 or 290 as possibilities. The AP reports that both WMG and Fifield will be "excluded from making another approach for six months under stock exchange rules." For WMG and EMI shareholders though, another six months is nothing new compared to the seven years EMI and WMG have played the buyout game.