LONDON (AP) — Struggling music group EMI faces being taken over by its bankers after failing to clinch a deal to sell the North American distribution rights for its artists to Universal Music Group or Sony Music.
EMI, which has the [lastfm]Beatles[/lastfm], [lastfm]Coldplay[/lastfm], [lastfm]Lily Allen[/lastfm] and [lastfm]Pink Floyd[/lastfm] on its books, had hoped to raise around 200 million pounds ($304 million) by offering its rivals a five-year licensing contract.
A source close to both sets of talks, who requested anonymity because the discussions were private, said Thursday that they fell apart after a failure to agree on price. EMI declined to comment.
The collapse of talks leaves EMI battling to raise 120 million pounds by mid-June to meet its commitments on loans from U.S. bank Citigroup. Another source familiar with discussions said that Terra Firma will talk to investors about raising the necessary funding.
If funds can’t be raised from investors and the loan goes into default, Citigroup could seize EMI and cause it to be sold or broken up.
EMI has been struggling to stay afloat since it was bought by private equity firm Terra Firma Capital Partners for 4.2 billion pounds on the eve of the credit crunch in 2007, saddling the company with debt.
Several big-name acts, including Radiohead and the Rolling Stones, quit the label amid the cutbacks and restructuring that followed.
Terra Firma, led by British financier Guy Hands, still owes some 3 billion pounds to Citigroup because of the deal and relations between the two have soured.
Hands is suing Citigroup in New York, alleging that the bank falsely claimed there were other bidders for EMI, encouraging the private equity firm to raise its own offer. Citigroup has denied the allegations.
EMI has fared worse than the three other major labels – Universal, Sony BMG and Warner Music Group – amid the decline of CD sales and the rise of digital music downloading.
Analysts have blamed Hands’ relative inexperience in the music business for exacerbating the company’s decline.
EMI earlier this year put its iconic Abbey Road studios up for sale after reporting a pretax loss of 1.7 billion for the year to March 31, 2009.
However, it shelved those plans after a public outcry led to the site being put on a protected list by English Heritage and said it would instead seek an investor to help rejuvenate the loss-making studios.
Adding to the company’s woes, Pink Floyd successfully sued the company for selling individual tracks digitally and Chief Executive Elio Leoni-Sceti quit the group last month after just 18 months in the job.
Like Hands, Leoni-Sceti, who joined the company from consumer products group Reckitt Benckiser, had found his music industry experience questioned.
Charles Allen, the former chief executive of broadcaster ITV PLC, who was EMI’s non-executive chairman, filled the vacancy by taking over as executive chairman.