On Friday, the Federal Trade Commission (FTC) gave approval to
the deal between Sony Corporation of America (SCA) - a U.S.
) - and EMI Music Publishing. The agreement, through which Sony
would buy EMI from
), received the U.S. regulators' nod without any restrictions.
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However, the deal got a confirmation from the European Union in
April on one condition - it has to vend the worldwide publishing
rights of artists, including Robbie Williams and Lenny Kravitz. In
order to abide by the antitrust law, the association agreed with
the European regulators to sell certain assets.
In November 2011, Citigroup divided EMI Group Ltd., a British music
company, and sold it for $4.1 billion. EMI's music and publishing
businesses were separated and sold in two parts.
Citigroup traded EMI's recorded music division to Vivendi's
Universal Music Group (UMG), the world's largest record company in
terms of market share, for $1.9 billion (£1.2 billion). UMG still
awaits regulatory approvals. On the other hand, the publishing
division was sold to a group of investors led by Sony for $2.2
The group of investors acquiring EMI Music Publishing along with
Sony included the Estate of Michael Jackson, Mubadala Development
Company PJSC, Jynwel Capital Limited, the
's (BX) GSO Capital Partners LP and David Geffen, the billionaire.
The sale of EMI's recorded music and publishing assets is an
achievement for Citigroup. In 2007, Guy Hands and his private
equity team at Terra Firma offered $6.7 billion as the bidding
amount for EMI but failed to meet the loan payments provided by
Citigroup to finance the deal. Therefore, Citigroup finally
apprehended EMI in February and since then had been conducting an
auction to sell this British music company.
After-Effects of the Deal
Upon closure of the deal, Sony/ATV Music Publishing will manage EMI
Music Publishing. Sony/ATV Music Publishing is a joint venture
between SNE and the Michael Jackson estate, with 38% holding in the
EMI Music Publishing, a leading popular music publisher, has a huge
collection of musical compositions and a big list of successful
songwriters. The business represents and controls varied catalogs
of over 1.3 million music copyrights covering all generations,
periods and regions of the world. Therefore, Sony/ATV aims to
fabricate a strong platform to sustain significant growth and earn
revenues from the EMI catalog.
According to Rob Wiesenthal, the Chief Financial Officer of Sony
Corporation of America, this deal strengthens the company's plan to
build the operational breadth of Sony/ATV Music Publishing with the
proficiency and experience of Marty Bandier, Chairman and CEO of
Sony/ATV. Following the acquisition, the growth of digital music
services will enable the songwriters' music to reach a wider
After evaluating all the pros and cons, we believe that this
two-part sale deal will maximize the value of EMI for Citigroup
while enabling the U.S. Bank to recoup its investments. Moreover,
under the current fundamental pressure on the banking sector, such
approvals will aid Citigroup to stand out in the market.
Currently, Citigroup retains a Zacks #3 Rank, which translates into
a short-term Hold rating. Considering the fundamentals, we also
maintain our long-term 'Neutral' recommendation on the stock.