Merger talks between London's
Warner Music Group
may be heating up again, according to a report out of the U.K.
The Sunday Times
reported that the two groups have advisers lined up and that talks might resume within months. Neither EMI nor Warner would comment.
Talks would mark the third time that EMI has tried to sidle up to Warner music. The first attempt came in 2000, around the time of the
merger with AOL. The EMI-Time Warner deal was scuttled by European regulators.
When Time Warner put its music division on the block, EMI was set to buy it when Edgar Bronfman Jr., Thomas H. Lee and Bain Capital swooped in with a larger offer. EMI dropped out of the bidding.
Bronfman has cut corporate expenses heavily and since taken the company public. EMI could benefit from increased presence in North America. Warner Music has artists including Green Day and Madonna, while EMI is home to Coldplay and the Rolling Stones.
EMI is understood to have lined up Citigroup and UBS to assist it, while Goldman Sachs and Lehman Brothers are advising Warner, according to the report. A deal would create the third largest music company in the world and rival Universal Music and Sony BMG.
Bank of America analyst Michael Savner increased his target price on WMG to $27 from $23, "to reflect a potential acquisition by EMI," while keeping his neutral rating on the stock.
Savner writes that the deal "could also be structured as a merger of equals with little-to-no additional premium provided. We believe that WMG shares already reflect takeover speculation and that any additional premium could eat into the value of potential deal synergies." Bank of America does business with Warner Music Group.
Last week EMI said it expects to report full-year revenue growth of 4% and double-digit profit expansion. It also said in a trading update that it has identified some $54 million in cost savings.
EMI share rose over 5% Monday in London, while Warner Music Group rose 33 cents to $24.58.