EMI drops $1.7bn Warner offer

MUSIC group EMI bowed to the inevitable and admitted defeat in its takeover battle for Warner Music.

As Time Warner was poised to announce it was selling the business for $2.6bn (£1.5bn) to former Seagram chairman Edgar Bronfman Jr, EMI withdrew its $1.7bn offer.

EMI chairman Eric Nicoli was told late on Sunday that Time Warner chief executive, Dick Parsons, had opted for Bronfman's private equity-backed offer.

Bronfman is expected to buy the published and recorded arms. EMI was bidding for only the recorded division.

Nicoli tried to persuade Parsons of the wisdom of pairing the recorded arms to release synergies of $300m. He urged him to sell the published music arm separately, potentially for $200m more than the Bronfman deal values it at. But Parsons, ever wary of Time Warner's debt, wanted a clean break.

Warner Music is the world's fourth-biggest recorded music group, with Madonna, REM and the Red Hot Chilli Peppers on its roster.

Investors are now concerned EMI, whose artists include the Beatles, Coldplay and Robbie Williams, will be left out in the current round of consolidation in the music industry. Declining sales worldwide have led rivals to seek mergers in an attempt to cut costs and reduce the impact of internet music piracy.

One option now open to EMI is to gatecrash the proposed merger of Sony Music and Bertelsmann's BMG music group.