Universal Gambled On EMI Deal

Universal Music Group took a gamble when buying EMI by guaranteeing Citigroup $1.9 million – even if U.S. and UK regulators blocked the deal.

If the deal fails to get cleared by the various monopolies commissions and Citi isn’t able to find another buyer at the price, then the Vivendi-owned company would have to make up the shortfall.

It could also mean that Warner Music Group owner Len Blavatnik would get a second shot at buying the company, although the New York Post claims he wouldn’t match Universal’s offer.

Former Warner Music chairman Edgar Bronfman Jr. has already described the deal as “dangerous” and the company is expected to try to convince the Federal Trade Commission to block it.

Universal, which expects to save $158 million from merging the two companies, is in the process of filing papers with the European Commission.

It’s expected that they will include an offer to sell off $657 million in non-core assets in order to gain antitrust approval.
In the U.S., a combined Universal-EMI would hold less than the 40 percent market share that would bother regulators, but in Europe the new super major would have more than 47 percent of the market.

Impala, the Brussels-based independent music companies’ association, believes the regulatory authorities wouldn’t be able to justify allowing the deal to stand.

“The clock has finally started ticking in Europe. Ultimately we expect this to lead to an outright rejection of both the Universal-EMI and Sony-EMI mergers,” said Impala executive chair Helen Smith.