You know things are turning around in the music business when the rumours of a hookup between Edgar Bronfman’s Warner Music Group and Guy Hands’ EMI start swirling again.
Permutations of that deal have made the rounds often over the past few years, and BreakingViews.com rolls one out again today, positing that Warner may have switched places and has the ability to buy EMI.
In the past, EMI tried to buy Warner. But now the boot could be on the other foot. EMI, home of the Beatles and Beastie Boys oeuvre, is in no state to pounce. Moreover, its chief lender, Citigroup, would love to exit its position. When the two last talked, the potential synergies from a combination looked to be in the order of $250 million — which would carry a net present value of some $1.6 billion.
The bigger sign, though, might be how investors flocked to last week’s Warner debt offering. The company saw so much demand for a $500 million bond deal that it issued issued another $1.1 billion in senior debt. That deal gives Bronfman and his team much-needed financial flexibility–whether it results in an EMI deal or just the ability to run the business better.
Here’s how WMG shares have performed compared to the S&P 500: