bloggingbuyouts

While Warner Music Group Corp. (NYSE: WMG) withdraws from social music site Last.fm Ltd., Universal Music Group is further embracing the service.

Universal has added its catalog of videos to Last.fm's on-demand streaming service and has agreed to share revenue from advertisements running alongside clips. The deal also includes a provision that Last.fm will highlight UMG's videos exclusively for one month after the agreement goes into effect, bringing clips from Jay-Z, Amy Winehouse, the Killers, Kanye West and others into view.

Warner, the first of the majors to cut a deal with Last.fm, pulled its songs from the site's on-demand service earlier this month, although it continues to allow its songs to be streamed through Last.fm's personalized radio service. A source with knowledge of the situation says Warner felt that Last.fm had failed to deliver promised ad revenue and is trying to renegotiate the terms of its agreement. While Warner has taken equity stakes in other companies that provide on-demand streaming music, such as Imeem Inc., Lala.com Inc. and the MySpace Music joint venture, the source says Last.fm will likely have to cough up more cash rather than equity to keep Warner's music on the site. CBS Corp. bought Last.fm for $280 million in May 2007.

Continue reading at TechConfidential.com.

Less than 45 minutes before the end of private equity firm Terra Firma's deadline today, the company announced that it had acquired the required number of shares to buy London-based music giant EMI Group PLC (LSE: EMI). Meanwhile, EMI stock soared in trading this morning to over 263 pence per share after closing at 254 pence yesterday afternoon. Terra Firma offered 265 pence per share to shareholders in a deal backed by Citigroup Inc.'s (NYSE: C) Citibank division.

The offer by Terra Firma was first announced on May 21 and required 90% approval from shareholders before the deal would succeed. The first deadline was in late June and after three extensions the firm reported to the London Stock Exchange that it had acquired 90.27%, according to Billboard.biz. Reported numerous times, shareholders were allegedly waiting for an offer by rival music giant Warner Music Group (NYSE: WMG), but after an announcement two weeks ago, that was no longer an option.

The deal was lucky to receive approval from the European Commission, something a previous offer from WMG was not afforded in 2006 (it sat at 315 pence per share, fueling shareholder hopes). In the last four months, EMI has been at the forefront of music sales with the announcement of Digital Rights Management technology-free files for sale on Apple Inc.'s (NASDAQ: AAPL) iTunes Store and a future Amazon.com (NASDAQ: AMZN) store. The deal with Terra Firma is not expected to alter these developments.

Less than a week after declaring that July 29 would be the last deadline EMI Group PLC (LSE: EMI) shareholders would get to sell to European private equity firm Terra Firma has announced one more deadline before the offer lapses: August 1. The deal requires 90% of shareholders to succeed, a value set by backer Citigroup's(NYSE: C) Citibank, and Billboard.biz reports that Terra Firma had acquired nearly 85% by closing last Friday. The previous deadline was 28 hours before on Thursday.

The £2.5 billion (or $5.1 billion) deal for Terra Firma to buy EMI was originally announced in May, but before Warner Music Group (NYSE: WMG) dropped out, Terra Firma had obtained less than 4% of shares. That was two weeks ago and the private equity firm reported to Billboard.biz that insurance giant Allianz was one of the major holdouts by Friday, holding 96,600 shares.

Terra Firma is offering 265 pence (roughly $5.38) per share in the offer, while EMI stock closed at 256.62 pence today. Before WMG's pull-out EMI stock had risen well above 270 pence, but after that the stock fell dramatically, falling as low as 245 during daily trading (never closing there). Shareholders originally held out in the hope that WMG would make an offer as lucrative as an earlier offer by the music giant for 315 pence.

The number of shares Terra Firma had on Friday (85%) was such a higher value than a week prior (26%) and a week before that (less than 4%), that it would be surprising if the deal did not go through by Wednesday. Then again, another deadline (no matter the possibility) may still be required!

Citigroup Inc. (NYSE: C), the company's whose Citibank branch is providing financial advising for EMI Group PLC (LSE: EMI) and debt for Terra Firma in the private equity firm's buyout of the music giant, is seeking to alter the arrangement of the buyout. Citigroup "is seeking possible improvements to the terms under which it is financing Terra Firma's bid," according to an Associated Press report.

Terra Firma's final deadline for shareholders to accept their offer is 1 pm Sunday, and analysts are commenting that Citigroup may alter the agreement so that another deadline is given, or a smaller number of shareholders would be required to have sold. Right now 90% are required for the deal to pass on Sunday. The firm reported acquisition of 26% of the stock by last Thursday, a significant boost from the 3.86% reported previously.

This financial worry has hit the buyout because of the decline of the credit industry since the May 21 announcement and the continued falling prices of EMI stock. Terra Firma offered 265 pence per share in a £2.4 billion (or $5 billion) deal, but EMI stock has fallen drastically since rival Warner Music Group (NYSE: WMG) dropped out last week, closing at 247.75 yesterday. Today the stock fared better, rising nearly 4 pence to close at 251.42.

Terra Firma may have clear sailing on its buyout of EMI, but with so many updates and so few shares secured this deal seems to be taking on aspects of the former relations between WMG and EMI over the last seven years. Unnamed analysts in both reports expect the deal to succeed.

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.

Over a week ago, the European private equity firm Terra Firma extended the deadline for its offer to buy EMI Group PLC (LSE: EMI) from July 5 to July 12. It was the second extension the firm had made, and this morning a third extension was made until July 19. According to Billboard.com, by 1 p.m. yesterday, just 3.82% of EMI's shares had been sold to Terra Firma. A week ago, that figure was 3.56%.

Yesterday, the European Commission approved the buyout; the regulatory commission found no antitrust issues. At the same time, EMI stocks dropped from the boost they enjoyed last week, falling from 271 pence on Wednesday's closing to close at 268.75 yesterday afternoon. The stock has fared nicely today, but has not risen much more than one pence in trading.

This third extension from Terra Firma comes in the face of continued hopes from EMI shareholders that Warner Music Group (NYSE: WMG) will make a counterbid. Billboard.com has also commented that "WMG is reported to have appointed Alan Mnuchin, of Wall Street investment group AGM Partners, to re-assess how to make another counterbid for EMI."

A merger between EMI and WMG might be beneficial for shareholders, but consumers of music from both companies may not be as happy. EMI dropped the use of Digital Rights Management technology in April, paving the way for higher quality downloads from online stores like Apple Inc. (NASDAQ: AAPL)'s iTunes Store and a future Amazon.com (NASDAQ: AMZN) store. WMG has remained firm in its support for DRM use. A combination of the two may result in the reversal of DRM-free use of EMI's products.

This post was originally written by Richard Driver for BloggingStocks.com.

Terra Firma, a European private equity firm, has again extended a deadline for EMI Group PLC (LSE: EMI) shareholders to accept the nearly two-month-old offer for the company. The firm is willing to pay 265 pence a share, roughly $5.34, but EMI's shares are currently at 268.5 pence, or $5.42, after the LSE opened this morning, according to a Billboard report from London. The new deadline is set for July 12 after the previous deadline passed yesterday.

The Billboard report indicated that Terra Firma had already received 3.53% of issued shares by the time the offer's deadline on June 28 passed. After two extensions, that amount has increased only 0.03%. The report also maintains that a spokesman indicated the firm would be willing to continue extensions until July 26 and that it is possible many shareholders are waiting for a higher counter-bid from Warner Music Group (NYSE: WMG). WMG has been rumored to be preparing for an offer since the Terra Firma buyout announcement was made, although EMI and WMG have flirted with joining for over seven years.

Stockholders may be hopeful for a bid from WMG, but the combination of these two music labels could be an unwanted and unfortunate move for the record industry. Both labels are committed to different and opposing growth models for the industry -- the most important and largest being the place of Digital Rights Management technology, something WMG is devoted to using. EMI dropped DRM use from its tracks in April and launched Apple Inc. (NASDAQ: AAPL)'s new iTunes Plus in May, the first of numerous DRM-free services.

I was quite impressed with the PR coup that consulting firm Bain & Company scored in last Friday's Wall Street Journal [subscription]. Right on the editorial page, as Zac Bissonette posted earlier in the week, Bain Chair Orit Gadeish and the head of its private equity practice, Hugh MacArthur, boasted about the triumph of private equity -- citing Bain Capital's success with Warner Music Group (NYSE: WMG).

What the article neglects to point out is Bain Capital's disastrous private equity deal with Vonage Holdings Corp. (NYSE: VG) and the egregious fees it took out of Burger King Holdings, Inc. (NYSE: BKC). I think Tom Taulli does a wonderful job skewering Vonage here. And I pointed out that Bain Capital owned 8% of Vonage, whose stock has lost 81% of its value since its IPO. Last August, I highlighted the $400 million in management fees and dividends that Bain Capital took out of Burger King. To BKC's credit, the stock has almost doubled since that post.

But the biggest affront to reason is that Warner Music's performance is nothing to boast about. Its stock has tumbled 44% from its May 2006 high of $29.40 to close today at $16.48. And its financial results lack luster. Its 2006 revenues of $3.5 billion were the same as 2005's, and while WMG turned a $169 million 2005 net loss into a $60 million profit in 2006, that profit was not sustained into 2007. Rather, Warner Music lost $27 million in the first quarter of 2007.