Peter Kafka

Recent Posts by Peter Kafka

EMI’s Owners Suffer a $1.6 Billion Case of Buyer’s Remorse

victrolaA lot of people couldn’t understand why Guy Hands, the private equity guy who bought EMI Music Group in the summer of 2007, was willing to pay so much for the music company. Now he says he agrees with them. His Terra Firma buyout firm has written off half the $3.2 billion he paid for the company.

He’s probably being too conservative.

At least if you use Warner Music Group (WMG) as a comp. Edgar Bronfman Jr.’s music company is (very) roughly the size of Hands’s music company and was forever slated to buy, sell to, or merge with EMI. (In May 2006, EMI was willing to pay $26 a share in cash for Warner, but Bronfman rejected the deal; a year later, EMI rejected a Warner offer.)

Take a look: WMG, currently trading at $1.86 a share, is down 86 percent since Terra Firma bought EMI in August 2007. At what point will Hands have to fess up and take another write-down? (Click chart to enlarge).

wmg-chart

Here’s an EMI employee with no complaints about the music business–Norah Jones, whose 2002 debut album was really EMI’s last super-huge success. Those days are gone, but she’s managed to hang on to her money–or at least enough to pay $5 million for a Brooklyn townhouse a couple months ago. Check out this excellent duet with Dolly Parton (yup, that Dolly Parton).


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