Universal wins U.S. approval to buy EMI
Published on Friday September 21, 2012 Sara Forden Bloomberg
Vivendi SA’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 Friday 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. for 1.2 billion pounds ($1.95 billion U.S.), effectively ending more than 80 years of business at EMI.
The takeover cuts the number of major record companies to three, as the industry faces challenges including illegal downloading and fewer CD sales.
“Our investment in EMI will create more opportunities for new and established artists, expand music output and consumer choice, and support new digital services,” Universal Music said in an e-mailed statement.
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.
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 UMG 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 (U.S.) 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.