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Rivals
see merger approval if EMI-Time Warner sells Virgin
Walt EMI Group and Time Warner could appease European antitrust
regulators opposed to their merger by agreeing to sell Virgin
Records, a competitor said.
“The idea of Virgin becoming available might be the kind
of radical solution the commission is looking for,” said
Philippe Kern, secretary general of the Independent Music
Companies Association (IMPALA), a trade group representing
independent music companies, which has lobbied against the
merger.
Time Warner and EMI offered to sell a recording unit that
has artists such as The Spice Girls and David Bowie to win
commission approval for the combination, The Wall Street Journal
reported, citing people familiar with the matter. They also
offered to sell Time Warner’s Chappell Music catalogue,
it said.
A person familiar with the negotiations, however, said the
companies have not formally proposed to the European Commission
the sale of Virgin Records or Chappell. “We’re not
going to comment,” Time Warner spokesman Edward Adler
said. EMI spokeswoman Amanda Conroy declined to comment on
the report.
The report came after sources said EU officials had decided
to block the EMI-Time Warner transaction but clear America
Online’s $138 billion acquisition of Time Warner. The
commission has said it objects to the Time Warner-EMI combination
because it could dominate the markets for recorded music,
music publishing and delivery of songs over the Internet.
In addition, the EU’s executive body still has concerns
regarding the AOL-Time Warner transaction, according to a
European antitrust official familiar with the discussions.
In the United States, Federal Trade Commission staff lawyers
are drafting a recommendation that the agency challenge the
AOL-Time Warner combination and have delayed sending their
proposal to the commissioners while the two sides engage in
settlement talks, people familiar with the probe said.
FTC staff lawyers are also weighing whether to recommend that
the agency challenge the Time Warner-EMI merger. “Many
investors will be very disappointed to see (today’s)
development,” said Michael Gifford of Canada Life Asset
Management in London. “We thought this deal would go,
albeit with a few small divestments — not major ones
that effectively kill the deal. I can’t see a situation
where a forced sale of Virgin would be beneficial to EMI shareholders
unless it was part of a bigger deal that would enhance value.”
Virgin, one of EMI’s two recorded music divisions, was
acquired from founder Richard Branson in 1992 for $822 million
and has artists including Lenny Kravitz and Janet Jackson.
Though the official EU deadline for concessions has passed,
EMI and Time Warner can modify their proposals or offer new
concessions that in one step answer all of the commission’s
concerns. “The companies have made proposals recently,”
said Amelia Torres, a spokeswoman for European Competition
Commissioner Mario Monti. “The companies are discussing
them with the commission.”
Torres said that no decision has been made on either the AOL-Time
Warner or Time Warner-EMI transactions. The commission’s
main problem with the link between Time Warner and EMI is
that it whittles the industry down to only four major music
companies from five, a problem that antitrust lawyers have
said is difficult to solve.
The advisory committee of EU antitrust experts will meet again
next week to examine any possible new concessions and further
analyze the AOL-Time Warner transaction, two European antitrust
officials have said. By vetoing EMI-Time Warner, EU officials
will eliminate many problems linked to the AOL-Time Warner
merger, analysts have said.
The commission must rule on the merger by October 18. In the
United States, Federal Trade Commission staff lawyers are
drafting a recommendation that the agency challenge the AOL-Time
Warner combination and have delayed sending their proposal
to the commissioners hile the two sides engage in settlement
talks, people familiar with the probe said. FTC staff lawyers
are also weighing whether to recommend that the agency challenge
the Time Warner-EMI merger.
SD
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