In yet another surprise during a week of head-spinning rumors and negotiations, Citigroup this morning announced the completion of the sale of EMI's recorded-music operation to Vivendi/Universal Music Group, ahead of its pending announcement of the sale of EMI Music Publishing to a Sony Corp.-led investment group.
According to the announcement, Vivendi will pay UMG "£1.2 billion ($1.91 billion) representing 7 x EBITDA prior to synergies." That means the recorded music had EBIDTA of £171 million pounds ($272 million).
In a statement, Vivendi CEO Jean-Bernard Lévy said: "We are very proud to welcome EMI into the Vivendi family. We all respect the labels within EMI as well as the artists and employees who contribute to its success. They will find within our Group a safe, long-term home, headquartered in Europe."
He added that he is "confident that we will be able to create additional value for our shareholders thanks to our knowledge of the industry and our proven track record of successful integration."
UMG chairman & CEO Lucian Grainge said in a statement: "This is a historic acquisition for UMG and an important step in preserving the legacy of EMI Music. For me, as an Englishman, EMI was the preeminent music company that I grew up with. Its artists and their music provided the soundtrack to my teenage years. Therefore, UMG is committed to both preserving EMI's cultural heritage and artistic diversity and also investing in its artists and people to grow the company's assets for the future. As a result, we will be better positioned to fully capitalize on the many new and exciting opportunities in the current marketplace, and also able to better serve our artists, songwriters and business partners, while offering fans even more choice."
Citigroup vice chairman and EMI chairman of the board Stephen Volk said in a statement: "We believe that this transaction accomplishes Citi's objective of maximizing the value of EMI, giving EMI Music a partner in Universal Music that appreciates EMI's rich cultural legacy, its incredible stable of musical talent, and its employees who work so hard to deliver successful outcomes for the artists they represent. We are grateful to Roger Faxon, his management team and all of EMI's staff for the continued success of this business during Citi's ownership."
The transaction has been approved both by the Management Board and the Supervisory Board of Vivendi, according to the announcement. Vivendi will finance the transaction from its existing credit lines. Concurrently, Vivendi and UMG will also sell 500 million euros worth of non-core UMG assets. A source says which assets will be sold hasn't yet been decided, but it would likely be one or two small catalogs.
While the Citigroup announcement says that the closing of the deal "remains subject to a number of conditions, including approvals of regulatory authorities in the countries and continents concerned," sources tell Billboard.biz that UMG had agreed to take on regulatory risk.
While IMPALA has been making noise that it wants the European Commission to block the deal on anti-trust grounds, a major-label source point out that UMG/EMI's combined market share will be about 36% worldwide, which is below the 40% global market share that causes concern for regulators.
Vivendi and UMG have been advised by Allen & Co. and SJ Berwin on this transaction. Citi Global Banking acted as financial advisor to Citi and EMI. Clifford Chance LLP, Shearman & Sterling LLP and Freshfields Bruckhaus Deringer LLP acted as legal advisors to Citi and EMI, according to the announcment.
As part of its announcement, UMG supplied the press with several quotes from artists and managers:
Mick Jagger: "This is a very positive development and I particularly welcome the fact that EMI will once again be owned by people who really do have music in their blood."
Dave Holmes, manager of Coldplay: "I look forward to working with the Universal team. They have assembled the most talented group of executives in the industry today and their success speaks for itself. This can only be a positive for the artists and executives at EMI."
Andrew Lloyd Webber: "This is thrilling news and a colossal act of faith in the future of recorded music. At last, Britain's greatest record company is in safe hands."
Billboard.biz will have much more on these deals today and in the coming days.