Bids for EMI stock up despite buyout annoucement

Despite an announcement early last week that EMI Group PLC had entered negotiations with the European private equity firm Terra Firma about a buyout, reports now indicate the Warner Music Group (NYSE: WMG) and several other potential buyers intend to make bids for the British music company. According to Forbes.com, the offer from Terra Firma is five pence higher than the most recent bid from Warner, which was 260 pence in February. A year ago, Warner offered EMI a bid of 320 pence per share, which was rejected. Terra Firma is also still seeing competition from other private equity firms, like New York-based Cerberus Capital Management.

Reportedly the deal with Terra Firma is being considered heavily because it carries the least regulatory difficulties from the European Commission concerning the creation of a monopoly. Since 2000, the repeated negotiations between EMI and Warner have hit a roadblock because of those fears. Last week's announcement also carried the indication that the Terra Firma bid was more "attractive" in the eyes of the Commission. In addition to Warner's new bidding intentions, former EMI CEO Jim Fifield also made an announcement he intends to bid 278 pence a share for his former company, with backing from the Qatari royal family and Geneva-based private equity firm Corvus Capital, even though they announced no further interest last Wednesday.

EMI has been struggling all year, despite growth since their announcement to ditch Digital Rights Management technology, with lower profits than 2006. On Friday, the stock closed at 275.75 pence, up more since the Terra Firma announcement (but only 3 pence below Fifield's apparent bid). Today it has continued that rise, with figures as high as 277 reported. Warner Music has also enjoyed a slight growth since last week. The stock closed on Thursday at 16.38, and rose to 16.48 on Friday. If the company hopes to make a serious and challenging bid to counter the already agreed upon Terra Firma bid, Warner will have to up the ante significantly.