PERMIRA is preparing to table a formal £2.5 billion offer to acquire Britain’s music giant EMI. The private-equity group could make its move as early as this week.

The offer could be pitched at 310p, compared with Friday’s closing price of 290p, but even at this level it will not receive the recommendation of the EMI board.

A takeover of EMI would see its roster of talent — which includes Coldplay, Robbie Williams and Kylie Minogue — move into private owernship. Most analysts believe Permira intends to split EMI into two separate divisions: publishing and recording.

This has already been examined by EMI’s board as recently as October this year. The break-up proposal was dismissed as destroying value.

There has been no shortage of private-equity groups courting Eric Nicoli, EMI’s chairman, since merger talks with its American rival Warner Music were blocked last summer on competition concerns. But so far all approaches have been rejected.

Hedge funds have piled into the stock in the past week in anticipation of a sale. Those in the frame include Hadron, GLG Partners, Eminence Capital, alongside traditional investors such as Schroders, Henderson and Standard Life.

The music label has had a high proportion of hedge-fund ownership since the original suggestions of a tie-up with Warner. Eclectica, the London-based fund run by Hugh Hendry, bought nearly 2% of the company and publicly declared it intended to block any merger attempt.

At the time Hendry stated: “EMI said they contacted all the top 10 shareholders to get approval for the rights issue. They certainly didn’t ask me and if they had, I’d have said no way. The stock is very cheap at the moment, so any rights issue now would be an extremely expensive way to do the deal.”

Whichever group buys EMI, one of its first priorities will be to secure a fresh contract with Williams, one of the music label’s most profitable acts.

His contract, with two albums still left to produce, expires next year. It cost EMI £30m last time with a potential to hit £80m if sales targets were achieved. So far sales have exceeded expectations, and it has been a lucrative deal for both sides.

If Permira’s bid were successful, it would have to wait until the outcome of a European competition case into a previous merger between Sony and Bertelsmann’s music operations. That case, which is expected to conclude next summer, would set the rules for future musicindustry mergers.

A number of fund managers are encouraging EMI to reject a bid and take on further debt in addition to the £1 billion it already has. But Nicoli has to measure whether this would entail EMI taking on an inappropriate level of risk for a public company.

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