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Sunday Telegraph: Time Warner and EMI set for music mega-merger

graphic
 

January 22, 2000
Web posted at: 9:29 p.m. EST (0229 GMT)

LONDON (Reuters) -- Time Warner Inc. of the United States is set to take a majority stake in Britain's EMI Group Plc in a multibillion-dollar deal to create the world's largest record company, the Sunday Telegraph newspaper said.

Time Warner, the parent company of CNN, announced its own merger with Internet giant America Online two weeks ago. The EMI deal would, above all, give EMI access to new Internet-based distribution channels for its music.

The report said senior EMI directors led by Chairman Eric Nicoli had been locked in talks over the weekend with Time Warner executives including Roger Ames, head of Warner Music Group, which would be merged with EMI.

It said the deal was set to be finalized over the weekend and announced to the Stock Exchange on Monday.

"We will not comment on the report," an EMI spokesman said. No one at Time Warner was immediately available to comment.

The report said the deal would create a business with sales of more than 5 billion pounds ($8 billion) a year.

The report did not provide details of the terms of the purchase or the exact stake that Time Warner planned to take.

But it valued the deal at $12 billion pounds ($20 billion) and added in an editorial that EMI shareholders might protest that Time Warner was not paying a premium for control of the group.

The Sunday Telegraph also said Nicoli would relinquish his role as EMI chairman, but that a leading role had been reserved for Ken Berry, the chief executive of EMI's record business.

EMI's artists include the Spice Girls, the Rolling Stones and Robbie Williams, while Warner Music has Cher, Eric Clapton, Phil Collins, Madonna and Fleetwood Mac on its books.

The merger would also bring together a handful of well-known record labels including Virgin, Atlantic, WEA and HMV.

Recent industry speculation has swirled around the likelihood of German media group Bertelsmann AG making a bid for EMI, though neither group has commented.

Warner is the fourth largest music business in the world and EMI is fifth, but the combined group would be catapulted into global leadership, the report said.

Warner Music is trying to recover from a drop in its nine-month earnings to $279 million from $288 million.

Meanwhile, EMI has reported a 10 percent rise in first-half pre-tax profit to 75.4 million pounds.

The report said that the deal would bring about cost savings of as much as 500 million pounds a year.

It said the transaction was being brokered by Warburg Dillon Read for EMI and by Morgan Stanley Dean Witter for Warner.

EMI's shares closed down 6.6 percent in London on Friday at 648 pence. Time Warner was up $3-5/16 in New York at $91-1/4.



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