NEW YORK (Reuters) - Warner Music Group executives are talking with KKR/Bertelsmann, a private equity-backed music joint venture, about a potential joint bid for beleaguered music company EMI Group, according to two people familiar with the talks.
The talks, which have taken place in the past few weeks, were described as being in an “early stage” by one person who asked not to named as the discussions were confidential.
It was not immediately clear if such a bid would be for parts or all of EMI, or whether it would be before or after any bankruptcy.
Private equity firm Kohlberg Kravis Roberts & Co and German media group Bertelsmann last year created a joint venture to own and manage music publishing rights.
It has long been expected that the KKR joint venture would be interested in making a bid for EMI’s song publishing unit.
EMI is owned by London-based private equity firm Terra Firma , which has warned of a “likely significant” shortfall when the covenants on its 2.6 billion pound ($3.88 billion) debt are tested at the end of this month. The world’s fourth largest music company is home to artists like Kate Perry, Coldplay, Pink Floyd and the Beatles.
In recent years EMI has lost market share to rivals as they struggle in the midst of an upheaval of the music business.
EMI Music, which is seeking new funds to avoid breaching debt covenants, said Chief Executive Elio Leoni-Sceti would step down on Mar 31, just a month after he was expected to come up with a new business plan.
Non-executive Chairman and former ITV boss Charles Allen is to become executive chairman after Leoni-Sceti leaves.
Terra Firma is also embroiled in an increasingly bitter legal dispute with Citigroup relating to the advice and financing it gave to enable the private equity group’s acquisition of EMI in 2007.
One of the people familiar with the Warner/KKR talks said the music company will wait for the outcome of the legal dispute before making a move for EMI.
Reporting by Yinka Adegoke and Megan Davies. Editing by Robert MacMillan