I.B. BAD EXCLUSIVE: DOES HANDS HAVE HIS EYE ON WMG?

The deteriorating situation at Warner Music—encompassing the company’s year-and-a-half-long cold streak, anemic stock and ongoing leadership vacuum—has reportedly become too much for primary investors Thomas H. Lee Partners and Bain Capital, who are now pondering a possible endgame.

The inside word is that Scott Sperling is leading a search for a potential buyer, and it now appears that one may be out there, checkbook in hand. The interested party is none other than Guy Hands, according to an inside source.

The Terra Firma chief is believed to be lining up money not only to minimize his risk but also to accumulate a war chest in order to buy WMG. At current valuations, Warner would appear to be far more affordable than it was last year, when Eric Nicoli made his approach.

But there’s said to be one major obstacle in the way of the deal getting done—namely, that Sperling and Bain want the same multiple in the sale of WMG as Hands paid for EMI.

If Hands can make the deal for Warner, he could then sell off Warner/Chappell Music, which has a greater value than WMG’s $1.5 billion market cap.

Considering the long and futile mating dance between Warner and EMI, joining them would be a bravura move indeed, as well as making the long-struggling British company competitive once again, following the losses of Radiohead, Paul McCartney and now Korn, which has satisfied the two-album requirement of its $25 million, prototype revenue-sharing agreement with the company...