Buyout could beef up Japanese company's content catalogue as it struggles to compete with Apple
Sony Corp has secured financing from an Abu Dhabi investment fund to back its bid for British music company EMI, a media report said, an acquisition that would beef up its content catalogue as it struggles to compete with Apple.
Sony now has backing from Mubadala, the Abu Dhabi fund, and investment bank Raine, to better compete with other bidders that include Universal Music Group and Warner Music Group, according to the Financial Times.
Citigroup is seeking $3bn to $3.5bn for EMI, home to artists such as the Beatles and Coldplay, but it may have to split the company in two, sources have said.
Sony declined to comment. Chief executive Howard Stringer has long sought to leverage synergies between the company's hardware and content including music, television and movies.
Mubadala declined to comment.
"They are not managing to make much of an impact in hardware, so it is probably a good thing for them to beef up their holdings of content," said Kazutaka Oshima, president of Rakuten Investment Management in Tokyo. "In that sense, I think it's positive."
Shares of Sony were up 4.4 percent, against a 2.8 percent rise in Tokyo's electrical machinery subindex .
Sony has launched its own online music and movie services to compete with Apple's iTunes. Analysts say boosting Sony's share of the music market would also give it more bargaining power with its California rival, because Sony also supplies content to Apple.
If Sony bought out the whole of EMI, it could be the company's biggest acquisition since its disastrous buyout of Columbia pictures in 1989. Sony lost out in this year's auction for Warner Music.
The second round of bids for EMI were due on Wednesday, and the tightening credit market is handing the advantage to strategic buyers like Warner Music, Universal Music and Sony/ATV, over private equity firms.
Sony/ATV, a joint venture between Sony and the estate of Michael Jackson, is bidding against BMG Music Rights for EMI Publishing, which holds the rights to more than 1.3 million songs. BMG is the joint venture between Germany's Bertelsmann and private equity group KKR.
But Sony's music division may also bid for the record label business, the Financial Times said.
Sony Music Entertainment had about 28 percent of the U.S. album market in 2010, according to Nielsen Soundscan, putting it in second place behind Vivendi's Universal Music Group, while EMI had 10 percent.
Sony's music division accounted for about 6.5 percent of its sales and 20 percent of its operating profit in the year to March 2011.
Universal and Ron Perelman's MacAndrew & Forbes are interested in EMI's recorded music business, which includes record labels Capitol and Virgin, sources said.