Bloomberg News

Universal Music Wins Approval to Buy EMI Recorded Music

September 21, 2012

Universal Music Wins U.S. Approval to Buy EMI Recorded Music

Antitrust approval for the transaction comes almost a year after Vivendi SA's Universal Music Group agreed to buy London-based EMI Groups’s recorded unit from Citigroup Inc. for 1.2 billion pounds ($1.95 billion), effectively ending more than 80 years of business at EMI. Photographer: Chris Ratcliffe/Bloomberg

Vivendi SA (VIV)’s Universal Music Group won approval from the U.S. Federal Trade Commission for its purchase of the recorded-music business of EMI Group, best known as the record label of the Beatles.

The FTC closed its review of the transaction, which allows the merger to go forward, following approval earlier today from European competition authorities after Universal Music agreed to sell about one-third of EMI assets to cut the combined group’s market share.

“Based on its review of company documents, discussions with industry participants and empirical analysis, commission staff did not find sufficient evidence of head-to-head competition to conclude that the combination of Universal and EMI would substantially lessen competition,” Richard Feinstein, director of the FTC’s bureau of competition, said in a statement.

Antitrust approval for the transaction comes almost a year after Universal Music agreed to buy London-based EMI’s recorded unit from Citigroup Inc. (C:US) for 1.2 billion pounds ($1.95 billion), effectively ending more than 80 years of business at EMI.

Major Companies

The takeover cuts the number of major record companies to three, as the industry faces challenges including illegal downloading and fewer CD sales.

“We have been working behind the scenes for this moment for about nine months, and we are very happy,” Universal Music Chief Executive Officer Lucian Grainge said in a phone interview.

With control over labels such as Virgin Records and Capitol, the next steps will be “about how we integrate, our ambition for the future and our intention to invest and rebuild with entrepreneurs, creative talent and music professionals,” Grainge said. The company is planning a “significant increase in investment,” particularly in Capitol records, he said.

Grainge also said he’s committed to achieving savings of 100 million pounds ($163 million) by integrating the two companies.

Among divestments, Universal Music will sell the Parlophone music label, home to Coldplay and David Bowie, as well as Black Sabbath’s record company Sanctuary, and the Chrysalis label, home to Depeche Mode, the European Commission said in a statement today. Universal will also avoid favorable terms for any new digital music deals in Europe for 10 years.

“The very significant commitments proposed by Universal will ensure that competition in the music industry is preserved,” EU Competition Commissioner Joaquin Almunia said in a statement.

Opposition Voice

Public Knowledge, a Washington-based public interest group, opposed the transaction, calling on the FTC to block the merger entirely or demand stronger concessions appropriate for the U.S. market, such as ordering Universal Music to sell Capitol Records or the Island Def Jam Music Group.

“It is incredible that the FTC has not taken any action whatsoever to protect consumers and competition in the nascent digital music market,” said Jodie Griffin, staff attorney at Public Knowledge. “By failing to act to block this merger or even impose even one condition beyond that imposed by the European Commission, the FTC is allowing UMG to acquire unprecedented market power and amass a dominant collection of copyright holdings.”

Citigroup sold EMI’s publishing division in a separate transaction for $2.2 billion to a Sony Corp.-led group. That purchase was cleared by EU regulators in June.

Citigroup seized EMI from Guy Hands’s private equity firm, Terra Firma Partners Ltd., in February 2011 after it failed to meet loan terms. Hands bought EMI in 2007.

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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