Nick Gatfield, Former EMI Exec, Calls Working Under Guy Hands' Regime 'Uncomfortable'
Nick Gatfield, Former EMI Exec, Calls Working Under Guy Hands' Regime 'Uncomfortable'

A frenzy of news stories Tuesday would have you believe that the Citigroup run auction for EMI's recorded music operation is not only heating up, but could soon come to a head. Whether that's true or simply just smoke and mirrors remains to be seen.

Meanwhile, the publishing side of the auction, which is said to be a lot further along, continues to slowly percolate, seemingly as if Citigroup is waiting to see if it can unload the recorded music operation before it pulls the trigger to complete the deal for publishing. Sources say that BMG Rights Management is in the lead, agreeing to pay more than $1.8 billion for EMI Music Publishing, although Sony Corp. still wants that deal bad, but still doesn't have its financing nailed down.

EMI: Access/Warner Pulls Out of Auction

The Wall Street Journal reports that Citigroup is in advanced stages to sell the recorded music operation to Universal Music Group (UMG). Although that was true the minute UMG agreed to meet with the bank because their talks were already beyond the second round when the major walked away from the bidding process on Oct. 26.

When it left the table, UMG's bid had been at about $1.2 billion, similar to the level of the bid by Ron Perelman's MacAndrews & Forbes. At the point of UMG's exit, Access Industry, which owns the Warner Music Group, supposedly was the high bidder at $1.5 billion-$1.6 billion. They pulled out of the auction sometime during the last weekend in October, leaving only MacAndrews & Forbes still in the auction, but waiting to hear form Citigroup, sources say.

On Friday, after one week of silence and very little auction activity, Citigroup reached out to UMG to see if they could be brought back to the table. UMG agreed to resume conversations with Citigroup this week and those talks began Tuesday (Nov. 8).

This week, some sources believe that Citigroup is touting to Universal that it has also brought Access Industries back to the table. At the same time, sources say that Citigroup is telling Access Industries that it has an even higher bid for the recorded music operation than their $1.5 billion-$1.6 billion bid.

EMI: With Bids Low, Company Considers Whether to Split Up or Postpone Sale

While some wonder if Citigroup is engaging in propaganda to fuel newspaper reports to jumpstart the auction, it's unclear if the suitors are going along for the ride.

As soon as Citigroup met with Universal Tuesday, sources say they were right back where they left off, with disagreements over pricing, disagreement over who would assume the 400 million pounds in EMI pension fund liabilities, and with Citigroup still insisting that the buyer take on the regulatory risk.

Universal will have another meeting Wednesday with Citigroup to see if the talks are real or just a gambit on Citigroup's part, a source says. Meanwhile, a source in familiar with the talks between Citigroup and Access says that while the two have been in contact, there have not been any negotiations in more than a week.