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Crunch meeting due next week as Europe’s investigation into Universal’s EMI bid reaches final stage

By | Published on Friday 31 August 2012


Despite various delays, the regulatory investigation in Europe into Universal’s bid to buy the EMI record company looks like it’s entering its final phase, with Business Week reporting that reps from national competition regulators within the European Union will next week be consulted. If they give the latest proposals the nod, approval subject to concessions could be announced by 19 Sep. The deadline for conclusion is currently 27 Sep.

As previously reported, despite initially saying no concessions should be required to get regulator approval for its ambitious EMI acquisition, Universal bosses subsequently proposed to sell off a significant portion of EMI’s European assets in order to get European Commission approval for their deal. Those proposals included offloading EMI units in various European countries, and the Parlophone and Chrysalis labels in the UK.

Though opponents to the deal continued to argue that any divestments to secure deal approval should include the sale of global rights in key catalogues, and it’s thought the final proposal to be shared with national authorities next week will include the global sale of the all important Parlophone label (sans The Beatles catalogue, obviously).

Since Universal conceded that some substantial sell-offs would be required to win deal approval in Europe, some have speculated that the enforced offloading of catalogues and European units could result in some substantial losses for the mega-major, ie it would have to sell the divested EMI assets at a price lower than that it is committed to pay current EMI owners Citigroup, pro rata.

But one almost guaranteed bidder for some of those EMI assets, the boss of BMG, Hartwig Masuch, had told the Financial Times that he thinks there will be enough interest in most of the EMI catalogues and units up for sale – and Parlophone especially – that Universal should be able to sell those assets on at the price it has paid for them.

Confirming he was “very interested” in acquiring some of EMI’s recording catalogues (despite the current incarnation of BMG being primarily in the business of music publishing rather than recording rights), Masuch said he had already entered into non-exclusive negotiations with Universal, and that his company’s owners – German media giant Bertelsmann and equity group KKR – were “very supportive” of plans to buy a bit of EMI.

He added that if BMG was to acquire a sizable share of the offloaded EMI units, giving it an interest in sound recordings more on par with its publishing business, it would in essence create a fourth major music company, allaying – perhaps – those concerns that the demise of EMI has created a music rights industry dominated by just three major players (ie Universal, Sony and Warner – the former two of which, of course, were in part elevated to their current uber-size by each acquiring half of the original BMG major music company).

If Universal does get approval for its EMI deal in Europe, all eyes will then fall onto America’s Federal Trade Commission, which is considering the proposals in the States, where there has been considerable political interest in the big music deal. Traditionally you’d expect the US competition regulators to be less severe than their European counterparts, though no one seems certain which way this one will go. No formal concessions have been proposed in America yet, though opponents to the deal have called for divestment proposals Stateside to match those in Europe.

Though some are still lobbying the FTC to block the deal outright. That includes the American Antitrust Institute, that raised concerns about the EMI acquisition just this week. Noting that a combined Universal/EMI would have had 51 of the titles in the Billboard Top 100 for 2011, the AAI said in a letter this week: “We urge the Federal Trade Commission to enjoin [prohibit] the transaction and preserve EMI as a fourth major music label in the already concentrated recorded music industry”.

As the AAI mainly exists to campaign for more aggressive anti-trust regulation, its opposition to the Universal/EMI deal isn’t surprising, of course. Nevertheless, Universal spokesman Peter Lofrumento issued a statement refuting the Institute’s claims, telling reporters: “Our acquisition of EMI will create even more opportunities for new and established artists, expand the marketplace with more music and support new digital services. We are working closely with the Federal Trade Commission and remain confident of regulatory approval”.

Elsewhere in Universal news, the major reported earnings of 88 million euros for the most recent quarter from revenues of 961 million euros. Revenues were down on the same quarter in 2011, but profits were up.

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