EMI surges after approach from Permira and Apollo

Shares in EMI surged more than 10 per cent yesterday after the music company said it had received a preliminary approach to take the business private. The private equity companies Permira and Apollo Investment Corp are understood to have made the move.

It is the second time this year that EMI has been involved in takeover talks, having locked horns with the rival Warner Music Group over the summer.

EMI shares gained rose to 289.5p, valuing the company at about £2.3bn. The shares still trail the 320p bid lodged by Warner Music earlier this year that valued the company at about £2.5bn. More than 126 million EMI shares were traded on the back of the confirmation, representing 15 per cent of the company's share capital.

Permira declined to comment while Apollo, a US firm, was not immediately available for comment. Earlier reports that Kohlberg Kravis Roberts, a US private equity firm, and the investment bank Goldman Sachs were behind the approach have been discounted.

Rumours of a potential management buyout, led by EMI's chief executive Eric Nicoli, have circulated over the past month. EMI declined to comment on any details related to the early-stage talks.

Speculation is building that the private equity companies are keen to get hold of EMI's sizeable publishing business and could sell the recording business to a rival such as Warner Music.

Warner declined to comment on the situation nor whether the private equity approach could tempt the company into renewing its takeover attempts in spite of regulatory uncertainty around the music sector. A source said the US music giant would "watch the situation closely".

A deal with EMI would add artists such as Coldplay and Robbie Williams to Warner's roster.

Talks over the long-awaited merger of Song and BMG, the world's third and fourth-largest music companies, were abandoned this year after European courts sensationally annulled the 2004 regulatory clearance of the deal. Both companies left the door open for a merger once the regulatory landscape was more certain after the EU reports its findings over Sony BMG next year.

Talks to take the company private would have to be pitched at least at the 320p level that EMI rejected earlier this year, although at that stage it argued such a bid significantly undervalued its business.