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Music merger rebuffed: EMI says no to Warner

Music company EMI Group PLC said Friday that it rejected a nonbinding $4.1 billion takeover proposal from Warner Music Group.

EMI Group PLC said Friday that it rejected a nonbinding $4.1 billion takeover proposal from Warner Music Group.

London-based EMI, which announced last week that it had been approached by former suitor Warner, said that the $5.06 per share offer, was inadequate based EMI’s own value and the lack of benefits from joining with Warner.

Shares in EMI closed 4.5 percent higher at $4.79 on the London Stock Exchange.

The company also said pursuing the deal would lead to “prolonged regulatory uncertainty and unacceptable operational risk at a critical time for the company.”

EMI, which has Norah Jones, Coldplay, Robbie Williams and the Beatles back catalog on its books, said it was focused on a restructuring program it announced in January when it surprised the market with the first of two profits warnings.

Warner’s top U.S. names include Madonna and the Red Hot Chili Peppers.

Warner and EMI began talking in 2000, but called off discussions last summer when a European court scuttled another industry deal between the music units of Sony Corp. and Bertelsmann AG.

The EU this week asked for a more thorough look at that deal, which could last another four months.

Music companies have been looking to consolidate as the market for physical CDs declines rapidly. The International Federation of the Phonographic Industry estimates that overall music sales fell around 3 percent in 2006 as a doubling in digital sales failed to compensate for falling CD sales and digital piracy.

EMI has blamed the overall industry decline for its troubles, citing disappointing North American CD sales last month when it announced its second profit warning this year. But analysts point out that other music companies like Warner and Universal have weathered the storm better.

Analysts say EMI lacks promising new music, and has weak internal controls and a poor record in the United States.

A combined EMI and Warner Music would control about 25 percent of the global recorded music market based on sales, ranking second to Vivendi SA’s Universal Music, according to the IFPI.

Warner Music Group spokesman Will Tanous did not immediately return a call for comment.