Press reports in the Guardian and the Wall Street Journal may suggest that Citigroup is close to completing two separate deals to sell EMI, but sources say that both negotiations still have complications to overcome.
Citigroup is seeking $1.7 million for the recorded music operation and $2.2 million for the publishing company, sources say. It also wants the buyers to assume pension fund liabilities, estimated at 400 million pounds ($641 million).
Talks for EMI's recorded music operation are still on track with Universal Music as the lead bidder, but a source familiar with the talks say further compromise is needed on the three main sticking points -- price, pension fund liabilities, and who assumes regulatory approval.
When talks resumed on Tuesday, sources say Universal was surprised to find that Citigroup had the same stance as when the major broke off negotiations on Oct. 26. The next day, Citigroup became more malleable on the issues, which allowed Universal to become more flexible. That resulted in possible compromises on pension fund liabilities and regulatory risk, although it's unclear if Universal has upped its $1.2 billion offer. But on Thursday, the source says no further progress was made on those issues, but concedes a breakthrough could still happen. The next 24 hours will tell, he says.
Meanwhile, Access Industries, the former lead bidder for the recorded music operation, which broke off talks sometime during the last weekend in October, appears completely out of the picture at this point.
As for the other deal, sources say that Sony has emerged as the high bidder for the publishing assets, which means that both bidders are now somewhere above the $2 billion mark. However, despite a report in the Los Angeles Times that says earlier news reports about Sony's difficulties securing financing appear to be exaggerated, sources told Billboard on Thursday afternoon that the company's still hasn't completed a deal with its bankers.
If it can't complete that financing deal soon, Citigroup could decide to go with lower bidder BMG, the same way the Warner Music Group private equity owners did earlier this year when it chose Access Industries over a Sony investment consortium, which was the high bidder but hadn't completed nailing down its financing.