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"Consolidation for consolidation’s sake doesn’t make a lot of sense."
—-Edgar Bronfman Jr.

WHITHER WEMI?

Edgar Bronfman Sends Mixed Signals During Business Week Event, Insists Company Can Grow on Its Own
We can make it on our own.

That was the message WMG chief Edgar Bronfman sent to the audience at a town hall-styled Q&A session with Business Week’s Steven J. Adler at the 92nd Street Y in New York City last night, responding to this week’s news that EMI has made a bid to acquire the company.

“Consolidation for consolidation’s sake doesn’t make a lot of sense,” he said. “Ours is not a business that requires scale economics.”

Bronfman pointed to the soaring value of the company, which a year ago offered shares at $17 a piece and now is up to $28.74, more than EMI’s offer price of $28.50 in cash and stock. The WMG board earlier said it had “carefully evaluated” the May 1 offer and unanimously opposed it because the bid “wasn’t in the shareholders’ best interests.”

WMG today reported a per-share loss for the quarter of 5 cents, better than the 28 cent loss in Q2 last year, which beat the expectations of analysts, who forecast a 16-cent loss.

“There is no particular case for or against merging,” said Bronfman. “There’s a reason they put blinders on horses, so they can run their own race. We’re trying to run our race.”

Bronfman refused to answer a question if he would be interested in acquiring EMI, but did respond to someone who wondered if a hostile takeover of WMG were possible by explaining it would be difficult given his Lexa Partners is one of four entities that own 75% of the company, including Thomas H. Lee, Bain and Provident. As one of four partners in Lexa, which reportedly controls anywhere from 10-12% of WMG, Bronfman’s personal stake in the company is estimated to be anywhere from 2.5%-3%.

The only time Bronfman chafed is when Adler asked him about selling Universal to Vivendi and how it cost his grandfather, noted Canadian bootlegger Samuel, a chunk of the family fortune. “You may as well ask me about a speeding ticket I once got,” he said.

Even though Bronfman seemed to downplay the WMG-EMI pairing, ultimately, it’s not really his decision to make, but will be made in conjunction with his partners, equity players holding anywhere from 63-65% of the pie, who traditionally prefer cashing out and moving on.

“They’re just warming up,” said one observer about talks between WMG and EMI. “There’s still plenty of action to come."

You betcha.

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