EMI SOLD TO U.K.
PRIVATE EQUITY GROUP

The Board of Directors of Maltby and Directors of EMI have announced the terms of a recommended cash offer for EMI at a price of 265 pence in cash (U.S. $5.23) for each EMI share, valuing EMI on an enterprise value basis at approximately $4.7 billion U.S. and valuing the entire issued share capital of EMI at approximately £2.4 billion. Some speculation has Warner Music Group, already examining EMI's books, making a counter-offer.

EMI shares soared on the news to finish 8.5% higher at 269 pence (U.S. $5.30) at the closing of the London Stock Exchange today.

Maltby is a newly incorporated company formed at the direction of British private-equity house Terra Firma for the purpose of making the offer.

Said Terra Firma CEO Guy Hands: "Terra Firma's objective is to build on EMI's current position as one of the world's leading music companies and accelerate the development of its digital and online strategy to fully exploit this long-term growth opportunity.”

Hands built up Nomura Holdings' buyout business in the '90s before qutting to run his own firm with Nomura's backing in 2002.

EMI Chairman John Gildersleeve said the company received "several" proposals, but that the Terra Firma offer delivers cash now without regulatory uncertainty.

"The global music industry is undergoing significant change and, whilst EMI is confident in its ability to deliver its recently announced restructuring plans, significant undertainty exists as to the timing and extent of future market developments. Terra Firma's offer is the most attractive proposal received with the minimum of operational risk to the compay.

Reuters reports Terra Firma plans to keep the company in one piece, retain existing management and proceed with plans to securitize the company's music publishing assets. It had been widely believed that a private equity buyer might only keep the cash-generative music publishing arm and sell the struggling recorded music division to WMG.

Said a source close to the company: "Terra Firma sees significant opportunity on both sides of the business. It believes in the digital growth opportunity in the music market, in general, and so the expectation is that the business will be held together."

The price of 265 pence per EMI share represents a premium of 13.2% from 234 pence, being the average closing price per share over the one-month period ended on Feb. 19, 2007, the business day prior to EMI’s announcement that it had received an approach from WMG. There's also a premium of 19.4% from 222 pence, the closing price per share on Feb. 19, 2007, the business day prior to EMI’s announcement that it had received the WMG offer.

The company reported a net loss of 288.5 pounds, following a profit of 86.1 million pounds in 2006. The net loss ws caused by a charge of $819.4 million (416 pounds) related to restructuring, amortization and financing costs. Today, they announced a 15% drop in sales, to $3.5 billion (2.6 billion pounds).

The Board of Directors of EMI intends to recommend unanimously that EMI shareholders accept the offer. Greenhill, Citi and Deutsche Bank are acting as joint financial advisers to EMI. Citi and Deutsche Bank have existing relationships with Terra Firma and therefore Greenhill is acting as the adviser to EMI.