EMI Reveals Profitable First Half; Merger Talks Reach 'Advanced Stage'

EMI Group plc this morning confirmed that it is advancing in its bid for Time Warner's recorded music division, and it unveiled better-than-expected results for the first half of the year.

EMI chairman Eric Nicoli says talks with TW have "progressed well and are at an advanced stage." He declined to reveal the nature of EMI's "firm proposal," claiming it would be "inappropriate to say more at this time."

Nicoli made the comments as EMI reported that adjusted pre-tax profits in the six months ending Sept. 30 declined 6.6% from the same period last year to £39.4 million ($66.9 million). Analysts had forecast profits of £24 million ($40.7 million). Revenues for the period held at £960.3 million ($1.63 billion). Operating profit improved 0.9% to £79.7 million ($135.4 million).

Underpinned by a "particularly good performance" in North America, EMI's recorded music division posted flat revenues at £758.6 million ($1.289 billion); the result compares favorably to the 10% overall decline reported by the global recording industry. Music publishing revenues slipped slightly to £201.7 million ($342.8 million). By early afternoon, more than 23 million EMI shares had traded on the London stock exchange, compared with a typical daily volume of less than 17 million. At 2 p.m. GMT, EMI's stock price was up 6% to 179p.

Speculation on EMI's hopes for a merger has been sparked by a period of fundraising activity. Recent reports have suggested that the London-based major has secured debt financing of about $1.6 billion (Bulletin, Nov. 7).

EMI announced in late September that it was in non-exclusive discussions on a "possible transaction" involving WMG. An earlier attempt to merge the two majors failed in 2000.

Meanwhile, a consortium led by Edgar Bronfman, former chief executive of Seagram and vice chairman of Vivendi Universal, is understood to be preparing an offer for WMG (Bulletin, Nov. 19). Time Warner's board is expected to meet tomorrow to consider either a merger or selling WMG to a third party.