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UPDATE 3-Terra Firma gets approaches for parts of EMI-source
* Publishing business seen as attractive to buyers
* KKR and BMG deny talks over minority stake - source
(Adds detail on valuation, disposals)
By Simon Meads and Georgina Prodhan
LONDON, May 28 (Reuters) - Guy Hands's buy-out house Terra Firma [TERA.UL] has received approaches for parts of EMI, a source familiar with the matter said, after a cash injection bought it more time to sort out the ailing music group.
A number of parties have expressed interest in parts of EMI's music publishing business, the jewel in the group's tarnished crown, including a joint approach from buyout firm KKR [KKR.UL] and German music venture BMG, the source said.
Boasting a roster of artists from the Beatles to Jay-Z, EMI's publishing arm is seen as a strong business with stable revenues, making money every time one of its songs is played on the radio, online or on TV.
Rival music groups, including perennial merger candidate Warner Music Group WMG.N, may face regulatory scrutiny if they attempt to buy the division. But other private equity firms also view it as a potential takeover target.
"It is an attractive business. You would actively look to buy it," said one private equity partner who declined to be named.
The division could easily fetch 7 or 8 times earnings, he said. The publishing division earned 133 million pounds ($194 million) before interest, tax, depreciation and amortisation in 2009, according recently-published results, giving it a potential value of around 1 billion pounds.
EMI, like much of the music industry, has been hit by illegal downloading and a move from album sales to single digital tracks. At the same time, it is struggling under the weight of debt piled on at the time of Terra Firma's 4 billion pound takeover in 2007.
Hands's firm has been looking at possible deals to make a dent in that debt, which now stands at 3.3 billion pounds.
It attempted a licensing deal for the music catalogue in the United States but talks with Universal Music Group (VIV.PA) and Sony Music (6758.T) fell apart as a deal was too complicated to do in a short space of time.
With Terra Firma investors having now pledged a 105 million pound equity injection to prevent the business falling into the clutches of lender Citgroup (C.N), Hands's firm has secured EMI for another year. [ID:nLDE64A1P9]
Talks for a licensing deal could resume with more time to conclude a deal, sources have said.
Sources familiar with the situation have also said the group got close to selling assets such as its Japanese unit, but pulled out over the price. Classics, jazz and Christian have also been mentioned as possible disposals.
Hands has become more flexible and realistic about potential deals in the last week or so, a source in the investment banking community said.
But it was unclear whether Hands was committed to getting real offers for parts of EMI or attempting to put pressure on Citigroup to restructure its 3.3 billion pounds of loans, the source said.
KKR and BMG, which is keen to pursue a strategy of buying up music catalogues, are seen as a logical buyer for some or all of the publishing business, the source said. Rival private equity firms or hedge funds could also be buyers.
A source familiar with the situation told Reuters KKR and BMG were not in discussions for a minority stake in the EMI publishing business. BMG's head Hartwig Masuch said earlier this month the group had no plans to make a bid for EMI. [ID:nLDE6410MN]
Terra Firma, BMG and KKR declined to comment. (Additional reporting by Caroline Copley, Kate Holton and Paul Sandle in London, and Megan Davies in New York; Editing by Dan Lalor and Jon Loades-Carter) ($1 = 0.6852 pound)
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