Bids to Buy Citigroup’s EMI Group Are Said to Fall Short of Expectations

But five months later, Citigroup’s sale of the EMI Group, one of the three other companies that dominate the world music market, is drawing less confidence. Turmoil in the financial markets has driven away many potential buyers and reduced the number of banks willing to finance bids. And according to several people involved with the auction, bidding prices have been lower than expected.

EMI, which releases recordings by, among others, the Beatles, Coldplay and Katy Perry and has a music publishing division that controls the copyrights of 1.3 million songs, was seized by Citigroup in February after a disastrous four-year ownership by the private equity firm Terra Firma.

After writing down EMI’s debt by $3.5 billion, Citi put the company on the market in June, with expectations among analysts and potential buyers that it might sell for up to $4 billion.

Of the five parties that have bid on all or parts of EMI, four are other big music companies. Warner — whose new owner is the Russian-born investor Len Blavatnik — and the Universal Music Group have made offers for EMI’s recorded music division, along with MacAndrews Forbes, the holding company controlled by Ronald Perelman. Those bids are said to be from $1 billion to $1.3 billion, according to these people, who spoke on the condition of anonymity because they had signed confidentiality agreements.

EMI’s publishing unit has drawn offers of $1.75 billion to $2 billion from Sony and BMG Rights Management, a joint venture between Kohlberg Kravis Roberts and the German media giant Bertelsmann. In addition, some of these companies have made offers for the entire company, but those bids are said to be lower than what Citi would get by splitting the company up.

Those companies declined to comment, as did Citi.

Many analysts say they believe the auction is simply the victim of bad timing. Tightened credit markets have made it more difficult for potential buyers to finance their offers, and nervous banks have required bidders to put up more equity.

“The global economy is in a different place than it was in February or March,” when the Warner auction began, said Ben Rumley, a media analyst with Enders Analysis in London. “Everything you read in the news indicates that it is difficult to raise financing for any business, let alone music. It’s not the greatest time to be looking for debt financing.”

Bidders have also sought to limit their exposure to EMI’s pension liabilities, which by some estimates could be as high as $600 million.

Despite the interest in Warner, there are persistent doubts about the health and investment value of large music companies. Among those concerns are the labels’ ability to shoulder the transition from physical to digital sales. New digital services like Spotify, which sell access to music by subscription, have generated excitement but are not profitable.

“The music market is continuing to contract more quickly than record labels’ digital strategies can offset,” said Mark Mulligan, an independent analyst of the music industry. “For a prospective buyer, that brings the serious consideration of waiting until the market bottoms out and getting most value then.”

Since most of the bidders are other major music companies, the auction faces regulatory complications in the United States and Europe. EMI’s record division is the smallest of the four major companies, with about 9 percent market share. But its publishing division — which controls the copyright for the music and the lyrics underlying songs — is one of the largest and most successful, with about 20 percent market share.

Depending on which company or companies win the auction, that could mean that EMI’s recorded music and publishing halves could be further carved up as a pre-emptive move to satisfy antitrust regulators.

The last round of bids for EMI were submitted to Citi earlier this month, but the people involved with the auction said that the bank had not given an indication of when it would make a decision. These people said that it could take weeks, and that there was still the chance that Citi could postpone the auction until market conditions — and bids — improve.

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