The future for EMI – a lesson from Cadbury'smain
Here’s a statement to EMI staff from CEO Roger Faxon. It is unusually clear and well-written – I see the hand of a good PR firm at work – and it gives a very upbeat view of the future.
In the last few minutes, we have announced that earlier today ownership of EMI passed from Terra Firma to Citigroup. The press release is attached for you here. It has been a long journey to this place. Much has changed at EMI and in our industry over the last three and a half years. What has not changed at EMI and never will is our fierce devotion to the artists and songwriters we represent. I believe that EMI, in both publishing and recorded music, is stronger today because of that commitment. Working together across both divisions, we are in the process of building a new business, a Global Rights Management business that will enable us to continue to deliver for successful outcomes for our artists and songwriters. We have the ability to shape our future and build a company that will not only survive but that will flourish in the years to come. Today’s change in ownership is but one step in that journey.
So how did this change of ownership take place?
Well, when a company’s value is less than its debts, one solution is to go through an administration process which allows the sale of the business in partial satisfaction of those debts. In our case it is not hard to see that our parent company Maltby Investments Limited (MIL) would never be able to repay the £3.4 billion it owed to Citi. With that being the case, it appointed an administrator who as an officer of the court was empowered to sell the EMI Group to Citi. This is sometimes called a “pre-pack” because it can be done in a matter of hours–and that’s exactly what happened here. EMI itself was never in administration. Where EMI came into the story was with its sale to Citi, which was followed by an immediate recapitalization of the company, which reduced our debt by 65%.
That’s how it happened, but what does new ownership mean for EMI?
Well first of all, it ends a struggle between our two principal stakeholders which has enveloped the business for most of the past two years. I’m sure that you’ll agree that the distraction has at times felt unbearable. We will now be able to put behind us the controversy of the Terra Firma-Citi court case, the cliff-hanging drama of the “will we or won’t we meet our covenant tests” and of course the never-ending press speculation. I, for one, welcome a respite from all that, though of course we will never be fully free of press speculation–we are EMI after all!
More importantly, this move finally puts EMI back on a solid financial footing. We have been burdened by an unsustainable level of debt which until today totaled close to £3.4 billion. With the change in ownership our debt has been dramatically reduced to £1.2 billion and we are sitting on more than £300 million in cash to boot. That gives us one of the most robust balance sheets in the industry. No one can any longer question our financial strength or our ability to compete head to head with our largest competitors. We already had a strong business–now we have the strong balance sheet to match.
Citi have made absolutely clear their support for our business and our strategy. They are committed to provide us with a stable and supportive environment to continue on our present course as we build that Global Rights Management business. That said, a music company–even one as great as EMI–doesn’t exactly sit comfortably in a giant financial services company like Citi. So while Citi is clear that they are under no time pressure to sell, and that they intend to stabilize the business, there is no doubt that in due course EMI will be up for sale just like it has been from the day Terra Firma bought it.
Most certainly, with the recent news about Warner Musicbeing up for sale, we will continue to be the subject of much speculation. The press will inevitably write that EMI will be broken up and sold in pieces. So, let me say this as clearly as I can: Global Rights Management is the future, and it takes both parts of the business working together to achieve that future. I have no doubt that the best possible way to yield the highest value for EMI is to keep our businesses together in pursuit of our strategy. As we move forward that will become evident even to the most sceptical observer. This is why I have every confidence that EMI will remain EMI for a very, very long time to come.
I’d also like to quash one other suggestion. Regardless of the country of origin of our owner, EMI remains a British company–both legally and spiritually. The history, tradition and heritage of this company cannot, and will not, be erased by a change in shareholding. We are EMI not because of who owns us, but because of who we are–the home of the greatest artists and songwriters of the past, present and future.
Finally, and most importantly, the change in ownership allows us to get back to doing what it is that so obsesses us, and what we’re all so good at–helping our artists and songwriters achieve the greatest possible success. This is, and needs to be, our sole focus. Nothing else is important. And it is full speed ahead. No one should worry about the future–it is in our hands. You should take comfort that Citi is committed to our success just as we are committed to the success of our artists and songwriters.
I want to take this opportunity to thank each of you for your continued support and dedication to EMI. That is what has made our incredible progress possible, in spite of the turmoil around us. It is that same support and dedication that will carry us forward as we forge a new business that can deliver real growth for EMI and success for the artists and writers that we are all privileged to represent.
may be a different set of suits, but they have a clear priority to sell the show as soon as a good price can be achieved. EMI is Rule Britannia and ever more shall be so, sings Faxon. Rubbish.