UPDATE 3-Terra Firma gets approaches for parts of EMI-source

* Publishing business seen as attractive to buyers

* KKR and BMG deny talks over minority stake – source

(Adds detail on valuation, disposals)

By Simon Meads and Georgina Prodhan

LONDON, May 28 (BestGrowthStock) – Guy Hands’s buy-out house Terra
Firma [TERA.UL] has received approaches for parts of EMI, a
source familiar with the matter said, after a cash injection
bought it more time to sort out the ailing music group.

A number of parties have expressed interest in parts of
EMI’s music publishing business, the jewel in the group’s
tarnished crown, including a joint approach from buyout firm KKR
[KKR.UL] and German music venture BMG, the source said.

Boasting a roster of artists from the Beatles to Jay-Z,
EMI’s publishing arm is seen as a strong business with stable
revenues, making money every time one of its songs is played on
the radio, online or on TV.

Rival music groups, including perennial merger candidate
Warner Music Group (WMG.N: ), may face regulatory scrutiny if they
attempt to buy the division. But other private equity firms also
view it as a potential takeover target.

“It is an attractive business. You would actively look to
buy it,” said one private equity partner who declined to be

The division could easily fetch 7 or 8 times earnings, he
said. The publishing division earned 133 million pounds ($194
million) before interest, tax, depreciation and amortisation in
2009, according recently-published results, giving it a
potential value of around 1 billion pounds.


EMI, like much of the music industry, has been hit by
illegal downloading and a move from album sales to single
digital tracks. At the same time, it is struggling under the
weight of debt piled on at the time of Terra Firma’s 4 billion
pound takeover in 2007.

Hands’s firm has been looking at possible deals to make a
dent in that debt, which now stands at 3.3 billion pounds.

It attempted a licensing deal for the music catalogue in the
United States but talks with Universal Music Group (VIV.PA: ) and
Sony Music (6758.T: ) fell apart as a deal was too complicated to
do in a short space of time.

With Terra Firma investors having now pledged a 105 million
pound equity injection to prevent the business falling into the
clutches of lender Citgroup (C.N: ), Hands’s firm has secured EMI
for another year. [ID:nLDE64A1P9]

Talks for a licensing deal could resume with more time to
conclude a deal, sources have said.

Sources familiar with the situation have also said the group
got close to selling assets such as its Japanese unit, but
pulled out over the price. Classics, jazz and Christian have
also been mentioned as possible disposals.

Hands has become more flexible and realistic about potential
deals in the last week or so, a source in the investment banking
community said.

But it was unclear whether Hands was committed to getting
real offers for parts of EMI or attempting to put pressure on
Citigroup to restructure its 3.3 billion pounds of loans, the
source said.

KKR and BMG, which is keen to pursue a strategy of buying up
music catalogues, are seen as a logical buyer for some or all of
the publishing business, the source said. Rival private equity
firms or hedge funds could also be buyers.

A source familiar with the situation told Reuters KKR and
BMG were not in discussions for a minority stake in the EMI
publishing business. BMG’s head Hartwig Masuch said earlier this
month the group had no plans to make a bid for EMI.

Terra Firma, BMG and KKR declined to comment.

Growth Stocks

(Additional reporting by Caroline Copley, Kate Holton and Paul
Sandle in London, and Megan Davies in New York; Editing by Dan
Lalor and Jon Loades-Carter)
($1 = 0.6852 pound)

UPDATE 3-Terra Firma gets approaches for parts of EMI-source