The Times June 29, 2006


Balance tips Warner's way in the battle of bids with EMI
By Dan Sabbagh



WARNER MUSIC will have to offer nearly 400p — or Ģ3.2 billion — if
its audacious counterbid to buy its rival EMI is to succeed, it
emerged yesterday, after each company revealed that it had tried to
buy the other twice.
The day of claim and counterclaim tilted the balance towards the
Warner camp, who believe that they have a chance of persuading EMI's
investors to force a sale — ending the long history of the British-
owned music industry.



Insiders at Warner, home to Madonna and James Blunt, said they were
confident that they had the firm backing of their three principal
venture capital shareholders. "By rejecting EMI's bids, this is
saying that Warner investors simply do not want to sell."

Yesterday it emerged that the two companies had spent an improbable
fortnight desperately bidding for each other, as they vied to become
the dominant partner in a deal that would bring EMI's The Beatles,
into harmony with Warner's Fleetwood Mac.

The duel pits Edgar Bronfman, Warner's chief executive, the Canadian
heir to the Seagram family fortune, against EMI's Eric Nicoli, the
former United Biscuits boss, who has tried repeatedly to win Warner
in six years as chairman. Both are playing to be at the top of the
global music industry.

EMI and Warner Music are the third and fourth-largest companies in
the global recorded music market, but are a long way behind the
Vivendi-owned Universal and SonyBMG.

This month Warner made a 315p — Ģ2.5 billion — all-cash counterbid
for EMI, which was swiftly rejected by the British company. Nine
days later EMI replied with a cash bid worth $4.6 billion (Ģ2.5
billion), or $31 a share. Warner refused to accept that, partly
because it was conditional on the "pre-sale" of its music publishing
arm.

Four days later, Warner upped its offer to 320p, but that, too, was
rejected because EMI's board believed that the counterbid was not as
generous as its own offer. According to one calculation circulating
in the British camp, EMI was willing to offer a 44 per cent premium
to Warner's pre-bid speculation, which it said was $21.50.

At that time, EMI was trading at around 275p. An equivalent 44 per
cent premium would take its own share price to 396p. A bid at that
level would probably be hard to resist, and the company feels that
there is "no dilemma at all" in rejecting any bid below 350p,
although it could take more than that to succeed.

The saga began at the beginning of May, when EMI made a cash-and-
shares bid worth $4.2 billion for Warner, priced at $28.50 a share
and comprising $20 in cash and $8.50 in EMI paper.

That was rejected by the Warner board, although EMI was working on
the basis that it could eventually persuade Warner's backers.

Warner is controlled by a consortium of Thomas H. Lee, Bain Capital
and Providence Equity Partners, plus Mr Bronfman himself. They have
an agreement to act as a bloc, making it difficult for EMI to
dislodge them individually.

EMI shares were up 23ūp to 307―p. Warner Music added 88 cents in
afternoon trading to hit $28.11.

THE TWO SIDES



Warner Music's argument for buying EMI rests on the performance of
the business since it was bought out by Edgar Bronfman and a
syndicate of venture capitalists. Under Time Warner the music
operation had been bloated and struggling to maintain share. In the
past two years costs have been cut and Warner has had successs
outside its US heartland with acts such as James Blunt. It has
attempted to become a digital leader, boasting higher share of
digital sales than EMI at about 10 per cent, and tried to promote
new ideas such as mini- albums through its label Cordless. But it
remains smaller than EMI in every key market other than the US and
runs its internation- al operation from New York — raising questions
about its ability to export music to the world.


EMI's argument for buying Warner rests on the belief that it has
proven management in recorded music and a stronger music publishing
business, which is the world's leader. The company's recorded music
division is run by Alain Levy, who helped to build Polygram until he
was forced out after that company was acquired by Edgar Bronfman's
Seagram (now Universal). EMI also believes that it is better at
developing successful operations around the world, as well as
exporting British talent such as Coldplay and Robbie Williams into
Europe. However, EMI's weak spot is the US, where it ranks a poor
fourth and, despite decades of trying, only occasionally finds a
breakthrough act like Norah Jones. It hopes that buying Warner will
finally solve its American problem.
CALLING THE TUNE



May 3, 2006: EMI announces it has approached Warner Music about a
possible acquisition worth $4.5 billion (Ģ2.5 billion). The annual
cost savings of the two companies merging are estimated at Ģ160
million

June 14: Warner makes a counterbid for EMI, offering to buy all the
share capital of EMI for 315p per share. EMI immediately rejects
this

June 23: EMI revises its proposal and makes a bid for Warner Music
of $31 per share in cash, funded by debt finance and a rights issue

June 27: Warner rejects EMI's proposal. Instead it again makes a non-
binding bid for EMI, proposing to buy it for 320p per share.

June 28: EMI's board rejects Warner's second offer as "wholly
unacceptable" and continues to press for Warner's capitulation. Its
shares rise 8.4 per cent on the announcement


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Posted on Thu, Jun. 29, 2006email thisprint this
More celebrities are pouring into wine business
BY DOROTHY J. GAITER AND JOHN BRECHER
Wall Street Journal
Animal labels are so 2005. Now that winemakers have used up most
real critters for their labels and are resorting to mythical
creatures like two-headed cats, it's pretty clear that this trend
has peaked. Next up: paparazzi wines.

Appropriate to an age when gossip is ascendant and personality is
king, wine stores these days are a virtual People magazine of labels.

There are labels for race-car drivers (Richard Childress, Randy
Lewis, Jeff Gordon, Mario Andretti), golfers (Arnold Palmer, Greg
Norman, Ernie Els) and stars of other sports (Joe Montana, Larry
Bird).

There are labels for live musicians (Bob Dylan, Vince Neil of Motley
Crue), dead ones (Jerry Garcia, Frank Sinatra) and some who may or
may not be dead (Elvis Presley). There are labels for living
Hollywood stars (Fess Parker) and immortal ones (Marilyn Monroe).

Madonna's father has his own winery — Ciccone Vineyard & Winery — in
Michigan. His winery says his first Madonna label will be released
any day now.

There is even celebrity synergy: Football commentator John Madden
grows some of the syrah grapes for the wines of Olympic skater Peggy
Fleming. John Madden on ice — wow.

Of course, there have been paparazzi wines for a long time. We
bought our first bottle of Always Elvis, with a shiny label outside
and bad Italian wine inside, in 1980. Around the same time, we had
our first Smothers Brothers wine and a Muscat Canelli from Pat
Paulsen.

The director Francis Ford Coppola started his winery in Napa 30
years ago; now, it's one of the biggest in the United States.
However, when Costco, Gallo and Martha Stewart all get involved, you
know a trend is coming ashore, so consider this:

Costco will soon be carrying a line of wines with Mick Fleetwood,
drummer and co-founder of Fleetwood Mac. Gallo now has MacMurray
Ranch, named for actor Fred MacMurray, who used to own the land
where the grapes are grown. And Martha Stewart has been quietly
mixing up her own line of Sonoma County wines. We're told she's
particularly interested in making a great rose. That probably will
be her first release, along with a chardonnay.

Clearly, this trend has hit the slipstream, as Lewis, the race-car
driver, whose wines are very well-regarded, might say. We seem to
see a new paparazzi wine every day.

Some companies specialize in putting celebrities' pictures on wine
labels. The question is: How are they? When we conducted a tasting
of animal labels a couple of years ago — we dubbed them critter
wines, a name that has stuck — we found most of them, as we put it
then, "beastly and fowl."

How about paparazzi wines? Are the pretty labels concealing ugly
wine? We conducted an extensive tasting to get the answer.

We found at least one wine from everyone mentioned above, plus quite
a few others — more than 50 bottles in all. A few, such as Greg
Norman, are widely available. Others are obscure. In some cases, we
had to order directly from the winery, and in other cases we had to
look hard to find wines from dealers who specialize in unusual
orders.

While many wineries are owned by famous people, we bought wines only
in which a celebrity's picture or name, or some version of the name,
appeared on the label.
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