Citigroup Buys EMI

Posted by at 9:26 am on February 2, 2011

Citigroup has bought EMI, hich owns Capitol Records, in a deal that may see the end of one of the four last major record labels. Citigroup already owned EMI’s $4billion debt and excused the debt in exchange for control of its operations. The takeover could signal the end of the 80 year-old company with its rich musical history.

EMI’s publishing catalog are the Beatles, recently released on iTunes, Pink Floyd, Beastie Boys, Beatles, Beach Boys, Garth Brooks, Duran Duran, Everclear, Foo Fighters, Judy Garland, Heart and Queen as well as more recent artists such as Katy Perry, Cee Lo and Radiohead. If one of the remaining three music groups (Warner, Universal, Sony) acquired EMI’s catalog, it could have a significant effect on digital music.

Citigroup has no interest in retaining EMI as its core business is banking, Splitting EMI for sale as two separate entities; one its publishing arm and the other its recording arm could be the fastest way for Citi to gets its money back.

The beginning of the end came with the purchase of EMI by Terra Firma, a private equity firm in 2007, which paid close to $8billion for the company. Terra Firma believed that it could sell off EMI’s debt but its plans were forestalled by the GFC. Although EMI was performing well financially, its debt burden was dragging the company closer to defaulting on its repayments to Citigroup.

As recently as two weeks ago, Warner Music was investigating the possibility of buying EMI as it sought to simultaneously sell itself as a value-added proposition. It was this maneuver that triggered Citigroup’s decision to take control of EMI now as the sale of Warner Music could result in potential bidders dropping out of the race to acquire the remains of EMI.

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