With the second-round, Oct. 5 deadline looming large in the EMI auction process, it sounds like the strategic bidders have the inside track, according to an informal survey of bidders, consultants involved in the deal and industry sources generally in the know.
Moreover, most think that Len Blavatnik/Access Industries/Warner Music Group is the odds on favorite to win the auction because synergistic cost savings from combining WMG with EMI afford them the luxury of bidding the most. But they also say they expect a bid from Access/WMG to get tripped up by regulatory risk on the publishing side.
While EMI CEO Roger Faxon has insisted that it makes sense to keep EMI intact, bidders say they believe it more likely that the publishing and record operations will be sold separately.
If that's the case, count on WMG to be aggressive in the pursuit of the recorded music portion. The Universal Music Group and Ron Perelman's MacAndrews & Forbes are also expected to make bids for the recorded music operations.
Meanwhile, EMI Music Publishing, the crown jewel in the EMI Group's assets, has strategic bidders Sony/ATV Music and BMG Rights Management in the hunt, with bidding expected to be steep. After the first round, Oaktree Capital Management, which had paired with Primary Wave, withdrew from bidding, after a $1.9 billion bid was found wanting, sources say.
Likewise, Apollo Global Management, which put in a first round bid for all of EMI, but was willing to pursue the publishing operation if the company is sold in pieces, may have also withdrawn from the process, sources say.
In setting up the auction, Citigroup has asked suitors to place bids on the entire company and what they would be willing to pay for each asset separately, similar to how the auction for the Warner Music Group, won by Access Industries in May, was conducted.
Consequently, if someone wanted to buy all of EMI, they would put in explicit bids for both sides, publishing and recorded music. If someone were interested in mainly publishing, they would put a bid in for that asset. Some EMI auction participants may be contemplating a bid for the entire company in order to improve their chances to acquire whichever asset they covet, says one investment banking executive involved in the auction.
Other bidders believed to be in the hunt include Platinum Equity and the Gores Group, who are bidding together; and Ron Burkle's Yucaipa Companies, which supposedly has digital guru Sean Parker in tow.
But even though Yucaipa stuck around in the WMG auction to the second round bid, other EMI bidders dismiss Burkle as not a serious suitor.
The companies mentioned in this article either decline to comment or had not responded to requests for comment by press time.