IB on Faxon's proactive move with Citi

ROGER SCORES ON END AROUND: Citigroup’s quick and decisive takeover of EMI last week means that the first domino has fallen in terms of the next chapter for this remarkably resilient company. Roger Faxon orchestrated the early takeover in conjunction with Citi, reportedly without Guy Hands’ knowledge. In pulling off this coup, Faxon instantly became a hero to EMI rank and file. Interestingly, the company has gone through so much change in an effort to stay alive that costs have been reduced dramatically, improving its chances for continued survival and its status as an attractive acquisition target. Further, EMI, with its Faxon-initiated rights management focus, appears to be a better fit with the new BMG/KKR model than does WMG. Warner’s primary disadvantage as a potential acquisition stems from the red ink on its balance sheet, having lost $143m in fiscal 2010 and another $18m in the fourth quarter of last year. Not only that, but Warner doesn’t appear to be as motivated to sell as Citi. (2/10a)