Record label changes tune: Universal and the remains of EMI have been released from captivity, says ALEX BRUMMER
One of the most shameful private equity episodes was the £3billion-plus purchase of Britain’s emblematic music producer and distributor EMI by Guy Hands’ Terra Firma in 2007.
His reasons for the deal were sensible enough. Hands saw a great British asset, the owner of music ranging from Elgar’s Land of Hope and Glory to the Rolling Stones, wasting away under assault from piracy and digital music and without a clear strategic direction.
The timing was terrible. On the eve of the great financial crisis, and with debt hanging around the neck of EMI, it became too burdensome for Terra Firma to handle. After a bitter legal dispute EMI fell into the hands of Citigroup.
Rock royalty: EMI, which was once home to the Rolling Stones (pictured) was sold to Guy Hands’ Terra Firma private equity outfit in 2007
Universal Music, run by the British music entrepreneur Sir Lucian Grainge, persuaded owner Vivendi it was the opportunity of a lifetime and so it has proved.
After a decade in the hands of Universal it has scrubbed up well and the whole shebang is coming back to the public markets with a valuation of £28billion.
Unfortunately, the initial public offering will take place in Amsterdam not London so EMI isn’t exactly coming home.
But the complexities of its ownership, with French tycoon Vincent Bollore in the driving seat, almost certainly played a role in the Dutch launch.
Ahead of the free-float Vivendi has been busy selling strategic stakes in Universal. A group led by Chinese tech investor Tencent snatched 20 per cent. And controversial US billionaire Bill Ackman acquired 10 per cent.
All of this makes for an eclectic share register. As for Bollore himself, he will still control some £5.1billion or so of stock in Universal. Grainge is also in line for a huge payday.
Putting to one side the financial shenanigans surrounding all of this, the positive outcome is that Universal and the remains of EMI have been released from captivity.
In the intervening period the challenges from piracy and illegal downloads have sorted themselves out and authorised streaming is a huge moneyspinner.
Indeed, a whole new separate industry has grown up around ownership of songbooks, with the UK’s Hipgnosis among the key players.
Universal, with its array of stars including Taylor Swift and Justin Bieber, has the heft to ensure proper distribution and make sure royalties end up in the right hands.
They are counting on you Sir Lucian.
The rise of the sneaker is one of the cultural trends of our time. As one footwear executive told me recently, even in the most formal settings the black sneaker is displacing the brogue.
JD Sports, where the Rubin family vehicle Pentland dominates the share register with a 55 per cent stake, is a huge beneficiary of this trend.
The company’s latest forecast of doubled profits to £750million in the financial year to January 29 sent the shares soaring. At almost £12billion it is now the most valuable standalone retailer in the FTSE 100.
Remarkably for a UK retailer it is doing well in the US, in a market which has been a bed of nails for British retail in the past.
Success must be attributed to the gruff management style of executive chairman Peter Cowgill. At a time when corporate Britain is under huge pressure to improve its governance JD Sports takes little notice.
It was remuneration committee boss Andrew Leslie who took the punishment for Cowgill’s £4.3million bonus, rather than the boss himself.
JD Sports is seen by landlords as one of the least co-operative firms when it came to settling outstanding rents during the pandemic.
In spite of its financial strength it is still declining to refund the taxpayer the business rates suspended in the pandemic.
Cowgill’s flouting of convention doesn’t seem to bother investors. As long as revenues sprint, and earnings speed ahead, poor governance is looked through.
Ken Costa is one of the wisest and more moral voices in British finance.
His assertion in the Financial Times that smart-chip maker Arm should remain in UK hands because of its value to the UK tech ecosystem and national security must be listened to.
On the table at present is a £30billion bid from US chip maker Nvidia, which would undermine Arm’s role as a neutral supplier.
The deal is being scrutinised by competition authorities across the globe.
Refloating Arm in London would reinforce its independence and enhance the City’s reputation for supporting brilliant tech.