You know what’s really awesome? Not only when you’re certain you’re right about something, but also when you’re proven right. That’s how I feel right now. You see, last December, as part of our year-end spectacular, I reported on what I had seen at the time as the inevitable self-destruction of Big 4 music group EMI, home of The Beatles, predicting its demise to be sometime this year. With the reasons numerous, I figured the man with the coolest name, Guy Hands, would probably begin a selling-off of the company’s assets in some way to save his financial ass.
Well, my bank Citigroup did me a favor back in February and accelerated the process outright by seizing the company from behind Guy Hands’ back, thus losing said ass overall. Why would this process accelerate? Because banks are in the business of producing money in and of itself, and collateral in the form of physical (e.g., physical property, employees, etc.) and abstract (e.g., intellectual property) assets can only earn money through an actual sale, and the only time such assets are gained are as default collateral. Put simply, banks do not like holding on to three things:
01. Student loans
02. Sub-prime mortgages
03. Any property seized because of bankruptcy or default (e.g., EMI Group).
So thus, it was inevitable that the whole of EMI Group would be sold off in some way; it was only a matter of when. That “when” came to be Monday, when Citigroup formally announced the sale of EMI to interested bidders, as well as formally considering “other options” such as recapitalization (good luck with that) and an initial public offering (duly good luck with that). Almost immediately, the sharks got out of their cages and chased the blood. While all three other music groups are showing interest in buying EMI assets, the one group that stands out is the largest of them all, Universal, which sources say will bid on the company.
Universal’s bid carries risk: As the largest group with over 30% of the market, the company would face higher scrutiny from FTC regulators than usual and would likely be forced to take only portions of the company, such as the publishing division, EMI Japan or EMI Europe (which remain surprisingly profitable), or the Pink Floyd and Beatles back catalogs. Still, such a full-scale bid seems more probable than Universal buying out Warner Music Group back before the latter was bought last month by oil oligarch Len Blavatnik. Speaking of that Russian, he is likely to also bid on EMI after the Warner sale is completed this summer, bringing speculation of a Warner-EMI merger full circle.
While the process will take months, it seems likely that EMI’s sale will be completed before the year is out, thus aligning with my prediction. Now if you’ll excuse me, I must celebrate in some fashion. Cake? Riots? French hookers?
…Any other suggestions?
• EMI: http://www.emimusic.com