BMG sale hits regulatory snag

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Talks to take EMI private could be complicated by a move by the European Commission to widen its investigation into the proposed merger of the publishing assets of the rival music groups Universal and BMG.

The private equity company Permira is locked in talks to buy EMI. While neither company has commented on details of the potential takeover, analysts and industry insiders have speculated that Permira might be looking to split up EMI.

Talks between EMI and Warner Music collapsed in July after the European Court of First Instance unexpectedly annulled the 2004 regulatory clearance of the merger between Sony and BMG. EMI and Warner both put merger plans on hold until the regulatory landscape became clearer.

Yet further regulatory pressure could also scupper a deal between Permira and EMI. The European Commission has extended its investigation into Universal's $2.2bn (£1.12bn) acquisition by up to 90 days. The regulator wants more time to consider whether the deal will undermine competition. The inquiry could last up to five months.

A source said a deal between EMI and Permira is not imminent and that the decision to extend the Universal-BMG investigation would be relevant to the discussions.

A Universal Music spokes-man said: "We believe, as we have always done, that the merger will be approved."

A combined Universal-BMG business would be the world's largest music publishing company with a market share around 22 per cent.