Chrysalis Group Plc is no longer for sale.
The London-based music company has rejected a 155 pence-per-share cash offer, which would have valued the business at about £104 million ($205 million), and terminated formal discussions with potential acquirers.
Speaking to Billboard.biz after this morning’s announcement, Chrysalis Music CEO Jeremy Lascelles declined to identify the company which made the 155p ($3.04) offer and would not reveal what price Chrysalis would have snapped up.
But Billboard.biz confirmed that EMI Group and Paris-based Lagardère were among the last bidders for the company. Bug Music, Warner Music Group and Universal Music Group pulled out of the process recently, sources say.
“The shareholders never gave an indication, but the board had a clear idea…of what we valued the business at. And that fell woefully short,” Lascelles says.
Sources close to later rounds of offers say that Chrysalis valued the company at £175 million ($344 million); at least one of the final suitors was unable to secure the financing it needed to bolster its offer.
Indeed, in its statement, Chrysalis isolated the “credit crunch” as a key factor. “The position of potential buyers and current valuation levels have been negatively impacted by global economic and credit market conditions.”
Shares in Chrysalis, which represents works from the likes of David Bowie, Blondie, OutKast, Johnta Austin and David Gray for publishing and has acts such as Feeder and Morcheeba signed to its recording division, sank by about 20% after the news and was hovering around 110 pence ($2.16) in early afternoon trading on the London Stock Exchange.
Lascelles admits the firm had gone through “a tough old few months.”
In a company statement issued today, the board said it expected to report a decline of more than 10% of the publishing division’s net publisher’s share (NPS) for the six months that ended Feb. 29. Publishing is the core asset of the company.
Chrysalis attributed the decline to the selling process, first announced in December, which took a significant amount of management’s time; uncertainty as to the company’s future ownership as negatively impacting the company’s ability to sign new writers; and a decline in synch licensing revenue as a result of the U.S. screenwriters’ strike that sidelined television and motion picture productions.
Chrysalis expects NPS for the 12 months ending Aug. 31 to be “slightly lower” than the £11.9 million ($24 million) achieved the previous year.
But the outlook for Chrysalis is far from bleak.
“Right now the process is absolutely on refocusing on running the business and recovering from what has been an unhelpful and damaging period for the company, although not irreparably damaging,” Lascelles says, “and that’s what our managers are focused on now.”
The refocusing process includes a shift in the role of co-founder and chairman Chris Wright. He will now serve as part-time executive chairman.
“It will make no change whatsoever to my day-to-day activities,” Wright tells Billboard.biz. “If anything, I will be even busier. I will be taking a significantly reduced salary with an additional reduction in overhead to send out a message to the City and others that we intend to run the company with an overhead commensurate with the changing circumstances within the global music industry.”
Given the financial climate, the company will make no such re-entry into a bidding situation. “We haven’t put ourselves through this process to stop it and start it again,” Lascelles says.
Today’s announcement accompanied a trading statement, which boasted overall earnings in line with management expectations, for the first six months of the financial year ending Aug. 31.
“We’re on a hot streak again,” says Lascelles, noting the company has a share of nine albums in the top 40 this week and has rights to Estelle’s U.K. chart-topping single, “American Boy,” featuring Kanye West.
Chrysalis sold its radio business last July to Global Radio for £170 million ($355.6 million) in order to focus on its music companies.
