European Commission backs Universal takeover of EMI
Friday 21 September 2012
Coldplay, Kylie Minogue, David Bowie and other prestigious artists are set to leave EMI after Universal's £1.2 billion takeover was approved today on condition it sells several of the recording company's labels.
The deal was backed by the European Commission (EC), which had been concerned that Universal would become too powerful if it swallowed EMI whole, on the basis that it loses EMI's Parlophone label, home to Lily Allen, Blur and Pink Floyd.
Universal must also sell a number of other assets including Mute, home to The Ramones, as well as Chrysalis, home to Depeche Mode and Moby, and its 50% stake in the Now! That's What I Call Music compilation joint venture.
EMI, which also owns Virgin Records, EMI Records and the Abbey Road studios, was taken over by US bank Citigroup in 2011 after its private equity owner Terra Firma was unable to keep up with interest payments.
Universal, which is led by Londoner Lucian Grainge, has Rihanna and Cher on its books, as well as Elbow, Florence + The Machine, Jay-Z, Kanye West, Lady Gaga, Nelly Furtado and U2.
It is still in talks with the Federal Trade Commission (FTC) in the United States over the deal but added it was "confident of approval".
The group is expected to raise between 250 million euros (£200 million) and 300 million euros (£240 million) from the sale of Parlophone and other smaller labels.
Universal will retain more than two thirds of EMI on a global basis, keeping EMI artists such as Katy Perry, Robbie Williams, The Beatles and the Beach Boys, which is much more than previously speculated.
A statement from the group said: "We remain true to our vision - to invest in talent and grow the company to offer consumers more music and more choice, while furthering our support for new digital services and entrepreneurs."
The EC had concerns that the deal would have allowed Universal to significantly worsen the licensing terms it offers to digital platforms that sell music to consumers.
It was concerned that following the merger, Universal would enjoy excessive market power with its direct customers, who sell physical and digital recorded music at retail level.
In particular, the Commission focused its investigation on the markets where record companies license their music to digital retailers such as Apple and Spotify.
The EC found that the proposed transaction, as initially notified, would have increased Universal's size in a way that would likely have enabled it to impose higher prices and more onerous licensing terms on digital music providers.
EC vice-president in charge of competition policy Joaquin Almunia said: "Competition in the music business is crucial to preserve choice, cultural diversity and innovation.
"In this investigation, we have paid close attention to digital innovation, which is changing the way that people listen to music.
"The very significant commitments proposed by Universal will ensure that competition in the music industry is preserved and that European consumers continue to enjoy all its benefits."
The EC announcement follows earlier clearances in key markets such as Japan, Australia and Canada.
Following the EC decision, the FTC in the US also approved the deal with no remedial action or disposals required. The transaction will now proceed to completion.
A statement from Universal said: "Our investment in EMI will create more opportunities for new and established artists, expand music output and consumer choice, and support new digital services."
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