In an apparent game of brinkmanship, Len Blavatnik's Access Industries has pulled out of the auction for EMI's recorded music operation, sources confirmed to Billboard.biz, even though the company was said to be the front-runner in the bidding. The news was first reported in the Financial Times on Sunday (October 30).
Sources say the two sides couldn't agree on a valuation, even though the Access bid was said to be in the range of $1.5 billion-$1.6 billion, far above what industry insiders and Wall Street analysts predicted the EMI recorded music operation would bring when Citigroup first took over the company from Terra Firma back in February. Access acquired Warner Music Group earlier this year.
Apparently, Citigroup was holding out for an even higher offer, but with the Universal Music Group's withdrawal from the auction last week, and a third bidder, Ron Perelman's MacAndrews & Forbes said to have made an offer below that of Access, it appears the financial firm may have overplayed its hand.
On the other hand, if the Universal Music Group's withdrawal from the auction was only a negotiating maneuver, then Access Industries' may have just given UMG an open field to land EMI, if it is willing to meet Citigroup's price.
Of course, the WMG withdrawl may also be a negotiating ploy, and this could all presage another round of negotiations with both UMG and WMG back in the auction, which would make Citigroup the canniest player of all. Time will tell.
In the meantime, things are going better for Citigroup in the other piece of the auction, where BMG Rights Management and Sony Corp. are competing to buy EMI Music Publishing, with bidding around $1.8 billion, sources say.
If Citigroup decides to retain control of the recorded music operation if it can't get its price, will it go ahead with the sale of the publishing division? Probably -- but as events thus far have shown, nothing is certain in this auction.