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Bronfman’s Plan B would be to use the proceeds of the WMG sale to buy EMI and take it public, as he did with WMG—which most agree would be an impressive second act.

I.B. BAD FOCUSES ON THE BEGINNING OF THE ENDGAME

The Bids Are in for WMG, but Will It Wind Up With a Strategic or Financial Player…and How Does Edgar Bronfman Fit Into the Big Picture?
The Warner Music sweepstakes is building to a climax, with final bids due this Wednesday (4/6). At presstime, the leading contenders appear to be strategic player BMG Rights Management, led by BMG’s Hartwig Masuch and KKR’s Henry Kravis, financial players including Ron Burkle and Ronald Perelman, and Platinum head Tom Gores, whose entertainment holdings make him a combination of the two. The speed with which WMG was put on the market can be attributed to T.H. Lee Partners point man Scott Sperling, who forced the issue with his fellow principals in an effort to beat Citigroup/EMI to the punch—pulling off a major coup. Most observers believe Edgar Bronfman Jr.’s Plan A is to own both EMI and WMG’s recorded music division, selling Warner/Chappell and using the money to finance the EMI purchase. Industry veterans say that if he can pull that off, he’s a Houdini. Bronfman’s Plan B would be to use the proceeds of the WMG sale to buy EMI and take it public, as he did with WMG—which most agree would also be an impressive second act. It’s thought that Sperling will be on board if Bronfman can pull off his Plan A, and possibly Plan B. But it’s also possible that T.H. Lee and fellow primary investor/majority stockholder Bain Capital will opt to cash out if Plan A doesn’t come to fruition... The recent revelation that Irving Azoff’s Live Nation is also in the hunt for WMG brings a new level of intrigue to the proceedings. The implications of a possible combination of Azoff, Bronfman and Lyor Cohen boggle the mind when one considers the strength of their personalities and the history of their relationship; Warner had a substantial piece of Azoff’s Front Line management early in the Bronfman-Cohen era. But if Bronfman swaps WMG for EMI, it’s possible that he and Cohen could go their separate ways, as rumors surface that their eight-year relationship is not as solid as it once was. Most believe that should a financial player wind up with WMG, Cohen would be retained… While the action percolates around WMG, Citigroup is said to be struggling to complete due diligence on EMI, having considerable trouble getting through the company’s mass of internal paperwork… Questions surround the status of EMI head Roger Faxon post-sale, the biggest being, will the new owner want Faxon to have a place at the table? In any case, he’ll reportedly get a big check when the sale is completed… The delay is reportedly frustrating prospective buyers, some of whom are believed to prefer EMI to Warner but have been forced to bid on the latter for fear of being left out in the cold… Both Sony Music and UMG are expected to partner with potential buyers of WMG and EMI in an effort to pick up rights that the new owner may want to—or need to because of regulatory concerns—divest; for example, distribution rights in certain territories… With three months to go before his arrival at Sony, speculators are already speculating as to what specific changes Doug Morris will make, what the company will look like once those changes are in place and what roles he’ll assign key executives. Those include heavy hitters Rob Stringer, Steve Barnett and L.A. Reid, who are expected to play significant roles in Morris’ hierarchy, and Simon Cowell, who is now one of the company’s biggest rainmakers. The future assignment of Clive Davis, though, remains unclear… Meanwhile, at UMG, what are Lucian Grainge and Barry Weiss’ plans for the East Coast, including IDJ? Weiss may permanently replace Reid as the head of the label group, while speculation has it that Steve Bartels will continue to play a significant role… Weiss and Reid both figure prominently in the Q1 marketshare results, which have their former label groups at #1 and #3 in new-release share, respectively, just as the two executives are in the process of essentially trading places. If this were the NBA, sportswriters would be hailing this outcome as a superstar trade that should benefit both teams. In the #2 position is Columbia/Epic, paced by the year’s biggest breakthrough in Adele, as the hot streaks of Stringer and Barnett continue unabated. The impressive performances of RCA/Jive and Columbia/Epic have powered Sony Music (at 29.9%) past UMG (28.4%), whose Universal Records Group is behind IDJ in the #4 position, both of them forging ahead of perennial market leader IGA (at #6, behind Atlantic), which had no superstar releases during the quarter... Names in the Rumor Mill: Richard Palmese, David Massey, Jeff Kwatinetz, Rick Yorn, Matthew Knowles, Richard Sanders, Peter Edge, John Branca, Troy Carter, Johnny Wright and Joe Galante.
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