The reports follow those previously reported rumours regarding the possibility of an EMI Warner merger. Both major record companies are now dwarfed by their rivals SonyBMG and Universal Music, leading some to suggest a merger is all but inevitable. However, others point out that it is not a foregone conclusion that any merger would get past competition officials at the European Commission, especially given that those officials are currently facing a legal challenge from the independent sector to their decision two years ago to allow Sony and BMG to merge. Some reckon that, given the fact a previous attempt by EMI and Warner to merge hit problems at the EC approval stage, executives might not be willing to risk the cost of a failed attempt at merger.
However, the Sunday Times yesterday said that senior players at both companies are currently working independently on potential structures for a merged operation, although the paper says neither side has yet approached the other with their proposals. However, investment banks have been approached, the paper reckons, with EMI likely to appoint the services of Citigroup and UBS, and Warner, Goldman Sachs and Lehman Brothers.
Should a merger take place it will be interesting to see what form it takes. Insiders say the investment community would lobby against a deal that saw a new company owned 50/50 by EMI Group and Warner Music given the highly public executive tensions that have resulted from the 50/50 deal struck by Sony and BMG. However, whether one side would be able to essentially takeover the other remains to be seen - some wonder if a merger with EMI would provide Edgar Bronfmann Jnr and his financial backers the opportunity to leave the music space with a sufficiently healthy profit from their dabblings in Warner Music.