Universal To Sacrifice Virgin?

Universal is reportedly trying to hive off Virgin Records as part of its bid to show European regulators that its $1.9 billion takeover of EMI’s record labels is good for the music industry.

Stories in major business papers suggest that sacrificing Virgin may be the only way to get the deal approved by the European Commission, which has already expressed concern that the new company would have too much power in the market.

EMI bought Virgin from Richard Branson in 1992. It is believed up to 20 potential buyers have already expressed an early interest in the company, whose artists include rapper Professor Green and Joss Stone.

There has also been speculation that Universal could put Parlophone and Capitol Records up for sale, the Financial Times says.

The New York Times reckons there’s a danger that Universal , which is owned by Paris-based Vivendi but has its HQ in Los Angeles, is faced with the prospect of making such concessions that they may effectively alter the value of the deal.

Universal has agreed to pay Citigroup $1.9 billion regardless of whether the deal passes regulatory hurdles. It would be forced to make up the shortfall if the American bank had to sell EMI to another bidder for less.

Universal is also believed to have agreed to pay 80 percent of the money by September, which would be more than a week before the EC is due to rule on the takeover Sept. 9.

Vivendi chairman Jean-René Fourtou has taken personal charge of the negotiations with the EC. Along with Universal chairman and chief exec Lucian Grainge, he needs to offer enough concessions to persuade the regulators to approve the EMI takeover, which is apparently an integral part of the parent company’s future strategy.

At the end of June, former Vivendi chief exec Jean-Bernard Lévy left his post amid rumours of disagreements with Fourtou about the French multimedia giant’s strategic direction.