Vivendi's Universal Music Group has agreed to buy the recorded-music business of EMI from Citigroup in a deal that values the label at $1.9 billion, according to Bloomberg, citing a person familiar with the situation. The deal may be formally announced by the world's largest music producer Universal later on Friday, and signals that by holding out on a sale, Citigroup was able to fetch an increased price.
Citi owns EMI's music label and publishing business after it seized the iconic British music maker from Guy Hands and Terra Firma, which bought it in 2007 for $6.5 billion. Terra Firma lost the company this year under a burden of debt and revenue below projections. When Citigroup took over EMI, it wrote off the $4.3 billion in financing it provided Hands to make the acquisition.Up for auction by Citigroup are EMI's music label, which was previously expected to draw up to $1.5 billion and its music publishing arm, expected to raise as much as $2.5 billion. In October, Bloomberg reported that Citigroup would receive lower bids in its sale of EMI group as a result of tougher market conditions for buyout financing. According to previous reports, Citi was to fetch as much as $3.2 billion for EMI's combined label and publishing businesses that trace back to 1931 and which own the publishing rights to Coldplay, The Beatles and Katy Perry. If Citi were to sell its EMI Music label and publishing arm separately, the bank was reported to be able to raise as much as $3.75 billion. Friday's deal signals that EMI may actually generate an over $4 billion valuation by selling businesses separately. Friday's expected sale doesn't include EMI's music publishing business that generates money by licensing its artists' recordings, memorabilia and radio play of music. Some bidders like BMG, a joint venture between private equity firm KKR (KKR - Get Report) and German media conglomerate Bertelsmann, as well as Sony (SNE - Get Report) may look to buy just EMI's music publishing arm for as much as $2 billion, people familiar with the situation have said.