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Universal to offer to sell some EMI labels
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Universal to offer EMI label sales to ease EU concerns
BRUSSELS (Reuters) - Vivendi's Universal Music Group will offer to sell three music labels belonging to takeover target EMI in a bid to ease European Union competition concerns about the $1.9 billion deal, two people familiar with the matter said on Tuesday.
The European Commission has warned Universal that its plan to buy EMI's recorded music business will significantly impede competition, signaling a possible veto unless it offers major concessions, three people familiar with the matter have told Reuters.
The combined company would be almost twice the size of its nearest rival in Europe while Universal's global market share of recorded music would rise to 36 percent from 26.5 percent.
Universal will offer to sell EMI's classical and jazz labels and its Virgin Records, one of the people said, declining to be identified because of the sensitivity of the matter.
"The Commission prefers entire businesses to be divested," the source said.
The EU watchdog has set a September 6 deadline for its decision.
Universal's stars include Lady Gaga, Rihanna and U2 while EMI's recorded music catalogues include The Beatles and Katy Perry.
EMI seller Citigroup Inc acquired the record label after its previous owner, buyout firm Terra Firma, defaulted on loans owed to the investment bank.
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Branson eyes Virgin Records bid
Sir Richard Branson is considering joining a bid for Virgin Records, the business with which his Virgin Group began, if Universal Music sells the EMI-owned label to secure regulatory approval for its £1.2bn takeover of the British music group.
The entrepreneur has held talks with Patrick Zelnik, who launched Virgin Records in France in 1980 and now runs Naive Records, a French independent label, people familiar with the discussions said.
“If Universal is ready to sell Virgin Records, then Richard Branson will support a transaction and support me in doing it,” Mr Zelnik told the Financial Times. “He wants Virgin to be in my hands,” he said, adding that he would merge Naive and Virgin Records if he succeeded.
Richard Branson said he “and Virgin have been assessing how to get back into the recorded music business for many years. The potential disposal of Virgin Records by Universal Music offers a wonderful opportunity to recreate a dynamic independent label in the market.”
Any offer may only cover Virgin Records’ European assets, one person familiar with the discussions said, adding that some artists signed to Virgin in the UK, such as Katy Perry, are released by EMI’s Capitol Records in the US and might not move with Virgin in a change of control.
Sir Richard started Virgin Records in 1970 as a mail-order delivery service for albums, then opened a shop on London’s Oxford Street. In 1972 he launched the label with Mike Oldfield as its first artist, later putting out albums by Culture Club, Phil Collins and Janet Jackson.
The costs of Virgin Atlantic’s battle with British Airways forced Sir Richard to sell Virgin Records to the then Thorn-EMI for £510m in 1992.
The news of his interest came as Mr Zelnik, a former opponent of music industry consolidation, came out in favour of the Universal-EMI deal in a Financial Times article. The acquisition ”could be just what the sector needs” if it included measures to boost independent labels and digital music retailers, he said.
Mr Zelnik is co-president of Impala, a European lobby group known for objecting to past attempts to merge EMI with Warner Music and its long battle against the Sony-BMG merger that formed Sony Music.
Other Impala members have argued against allowing Universal, the market leader, to buy EMI. Martin Mills, whose Beggars Group puts out Adele’s albums in the UK, told a Senate subcommittee Universal was a monopolist seeking more power.
An Impala meeting on Monday failed to break the deadlock, with 14 out of 24 members voting in favour of the deal – short of the two-thirds majority needed for the organisation to support it.
Helen Smith, Impala’s executive chair, said on Tuesday that the board had voted to continue opposing the Universal-EMI deal without “comprehensive” remedies.
“Our board took a clear decision yesterday to continue its opposition to the Universal/EMI merger, rejecting remedies which do not deal with the specific problems set out in the EC’s statement of objections. The issue isn’t just digital, it’s physical and access to media- exposure for new artists, as well as the foreclosure of independents when it comes to signing artists,” she said, adding: “We all respect Patrick Zelnik’s view, but the FT article is the Naive position, not the Impala position.”
Universal and Vivendi executives are expected to meet European regulators including Joaquín Almunia, the EU’s competition commissioner, this week to pitch what Lucian Grainge, Universal’s chief executive, has called a “manifesto” to restore industry growth including disposals and behavioural concessions.
The Commission has traditionally preferred structural remedies such as disposals to reduce buyers’ market share over behavioural promises, which are harder to enforce.
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