EMI concerns grow at Warner Music

By Michael Flaherty

NEW YORK (Reuters) - Declining profits and growth at EMI Group Plc EMI.L are becoming "increasingly problematic," said a large shareholder of Warner Music Group (WMG.N: Quote, Profile, Research, Stock Buzz), which is pursuing a bid to buy EMI.

"We want to be very realistic about what we would be buying and what we could do with the company, (as) the base level of profitability and the growth becomes increasingly problematic," said Scott Sperling, co-president of Thomas H. Lee Partners, speaking at the Reuters Hedge Funds and Private Equity Summit in New York on Tuesday.

Britain's EMI rejected a 2.1-billion-pound ($4.1 billion), or 260 pence per share cash takeover proposal from Warner Music Group last month, saying the price was inadequate and not in the best interests of its shareholders.

Thomas H. Lee Partners owns 37.2 percent of Warner Music, according to Reuters data. Warner and EMI, the world's third-largest music company and home to Robbie Williams and Coldplay, have made several attempts to strike a deal for at least six years.

Last year Warner, the world's fourth-largest music company and with artists including Madonna and the Red Hot Chili Peppers, offered 320p a share for EMI.

"Clearly that's not anywhere near what you'd want to pay today," Sperling said. EMI issued its second profit warning in as many months in February.

"EMI has announced a series of disappointing results and we don't see it turning around," Sperling said.

Thomas H. Lee Partners, whose namesake and founder officially left the firm last year, is in the process of raising a $9 billion buyout fund. The Boston-based firm focuses on majority buyouts of North American-based companies.  Continued...