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Universal continues to wrangle over what assets must go to secure EMI deal approval
By CMU Editorial | Published on Wednesday 18 July 2012
While Universal Music chief Lucian Grainge was hoping to sweet talk European regulators into green lighting his bid to buy the EMI record companies with talk of a “manifesto for the new music industry”, a vision for a fairer, finer, cleaner, greener music business, where flowers would grow, people would smile, and everyday would be a Friday, sources say that EC officials hammering out a deal with the mega-major are more interested in how much of the EMI recorded music business they can force its suitor to sell. As previously reported, informal talks are now underway between the European Commission and Universal, and its parent company Vivendi, as to what remedies would enable Europe’s competition regulators to allow a merger of the Universal and EMI labels.
It seems a given that EMI’s classical and jazz catalogues would be sold off as part of the deal, as would some of EMI’s Virgin Records business. Sources say that Universal’s starting gambit was to sell Virgin’s mainland Europe operations, keeping the more lucrative Virgin UK and Virgin US catalogues. But with EC regulators still looking a little glum at the table, it’s believed that Virgin UK has now been offered, though officials are still pushing for a global sale of the division. Whether a commitment to sell EMI’s Classics and Virgin catalogues and divisions worldwide would be enough to get the EC go ahead isn’t yet clear.
According to Billboard, a report from Barclays speculating about Universal’s deal with the Euro-regulators, and any subsequent asset sale, assumes the mega-major may be forced to sell up to half of EMI’s catalogue to placate officials. It also reckons that, even if the music major can engineer a bidding war between rivals and equity types over those assets, Universal would likely not earn from the sale what it has committed to pay current EMI owners Citigroup (pro rata to the total price Universal will pay for EMI Music in its entirety), resulting in a loss of up to 200 million euros on the deal.
Universal was due to make its formal proposal regarding divestments today, though it’s thought that document might not now be submitted until tomorrow. How quickly the European Commission will then respond isn’t clear. Although the EC’s deadline for ruling on this deal was extended into September, some now wonder if, actually, a resolution could be reached sooner.
If Virgin Records is put on the block, especially if it includes Virgin UK, it will be interesting to see who bids. It has long been assumed that Warner will bid to buy any EMI assets Universal is forced to sell, especially if it believes it can get a good price. Though a spokesman for Richard Branson confirmed yesterday that the Virgin chief would also consider bidding, as part of a consortium, to buy back the record company he founded in 1972, and sold to EMI in 1992 (and who knows, Universal might throw in Branson’s other record label adventure, V2, the UK-side of which it acquired in 2007).
A spokesman for the Virgin chief said yesterday: “Richard Branson and Virgin have been assessing how to get back into recorded music business for many years. The potential disposal of Virgin Records by Universal Music offers a wonderful opportunity to recreate a dynamic independent label in the market”. As previously reported, former Virgin France exec Patrick Zelnik, now boss of French independent Naïve, has said he would lead a bid to buy Virgin with Branson if it came up for sale.
