UMG Purchase Of EMI Grinding Through Regulatory Process, But Is There A Potential Problem Ahead?
March 23, 2012 at 3:50 AM (PT)
THE NEW YORK POST reports, "UNIVERSAL MUSIC GROUP is preparing to sell overseas assets, including various music catalogs and real-estate holdings, to help fund its $1.9 billion planned purchase of rival EMI’s recorded music business."
When UMG agreed to acquire EMI last year, they reportedly needed to spin off close to $700 million in assets.
The shedding of assets would also help with regulatory approval of the deal. UMG is currently awaiting approval from antitrust officials in both the U.S. and EUROPE. THE POST notes, "THE EUROPEAN UNION's Competition Commission is expected to announce that the review has entered the 'second stage,' which entails a 90-day period of more in-depth questioning. At the end of that process, European antitrust regulators could require that UNIVERSAL MUSIC divest additional assets as a condition of the deal."
If Deal Falls Through, It Could Cost UMG
Meanwhile, THE WALL STREET JOURNAL writes that UMG is facing a large loss if the deal to buy EMI were to fall through. They report, "AT&T bet $4 billion it could purchase rival T-MOBILE USA without interference from antitrust regulators. It lost. Now, VIVENDI's UNIVERSAL MUSIC GROUP is making a similar wager that could prove even more painful."
So what's the worst-case senerio? "Unlike the AT&T deal, which included a fixed payment to T-MOBILE, the amount of pain that UNIVERSAL MUSIC might incur depends on how much another buyer would pay for EMI," reports THE JOURNAL. "Effectively, EMI would go back on the auction block. If it fetched less than $1.9 billion, UNIVERSAL MUSIC would be on the hook to make up the difference. The trouble is that a second auction could be less competitive. First, other buyers would know that the previous high bidder was out of the game. And it is possible that there would be fewer eligible bidders."