It's Official! UMG Buys EMI Music

EMI Sold

It's official! VIVENDI's UNIVERSAL MUSIC GROUP (UMG), announced TODAY (11/11) that they have signed with CITIGROUP INC. a definitive agreement to purchase EMI's recorded music division for a total consideration of £1.2 billion (approximately $1.9 billion) representing 7 x EBITDA prior to synergies.

VIVENDI CEO JEAN-BERNARD LÉVY said, "We are very proud to welcome EMI into the VIVENDI family. We all respect the labels within EMI as well as the artists and employees who contribute to its success. They will find within our Group a safe, long-term home, headquartered in EUROPE."

LÉVY added, "We plan to acquire EMI's recorded music division on attractive terms, adhering to our principle of total financial discipline. We are confident that we will be able to create additional value for our shareholders thanks to our knowledge of the industry and our proven track record of successful integration. LUCIAN GRAINGE's personal experience and heritage will be a major asset in making the combined entity a great success."

UMG Chairman/CEO LUCIAN GRAINGE said, "This is a historic acquisition for UMG and an important step in preserving the legacy of EMI MUSIC. For me, as an Englishman, EMI was the preeminent music company that I grew up with. Its artists and their music provided the soundtrack to my teenage years. Therefore, UMG is committed to both preserving EMI's cultural heritage and artistic diversity and also investing in its artists and people to grow the company's assets for the future. As a result, we will be better positioned to fully capitalize on the many new and exciting opportunities in the current marketplace, and also able to better serve our artists, songwriters and business partners, while offering fans even more choice."

CITIGROUP Vice Chair and EMI Chairman STEPHEN VOLK said, "We believe that this transaction accomplishes CITI's objective of maximizing the value of EMI, giving EMI MUSIC a partner in UNIVERSAL MUSIC that appreciates EMI's rich cultural legacy, its incredible stable of musical talent, and its employees who work so hard to deliver successful outcomes for the artists they represent. We are grateful to ROGER FAXON, his management team and all of EMI's staff for the continued success of this business during CITI's ownership."

The transaction has been approved both by the Management Board and the Supervisory Board of VIVENDI. Closing of the agreement remains subject to a number of conditions, including approvals of regulatory authorities in the countries and continents concerned.

VIVENDI will finance the transaction from its existing credit lines. Concurrently, VIVENDI and UMG will also sell 500 million euros worth of non-core UMG assets.

EMI Publishing Goes To Sony/ATV

THE LOS ANGELES TIMES reports, "SONY/ATV has reached a deal to buy the second part, the publishing division in charge of songwriting copyrights, for $2.2 billion, according to a person familiar with the matter."

IMPALA Objects

As expected IMPALA, the pan-European trade body for the indie label sector, promised to oppose the opposition completely -- and not just demand larger concessions such as selling off some of UNIVERSAL’s existing assets.

"Following the announcement by VIVENDI of the purchase of EMI recording by UNIVERSAL, IMPALA confirmed it would oppose the sale before the regulators and expects them to move quickly to block the deal," its statement read. "IMPALA takes the view that even if UNIVERSAL proposes to increase the 500m divestments it is prepared to make, the deal will not be accepted. It points out that the last time the European Commission looked at UNIVERSAL [when it merged its publishing company with BMG MUSIC PUBLISHING], it ordered the company to sell off assets to cut it down to an acceptable size. Since that decision, UNIVERSAL has grown, which makes it even less likely that the regulators would accept any new acquisitions. In addition, IMPALA has already asked the EUROPEAN COMMISSION to investigate UNIVERSAL’s tie-up with LIVE NATION.

IMPALA Executive Chair HELEN SMITH told CMU: "Given that BRUSSELS has taken a previous decision that UNIVERSAL should not be any bigger, we would expect the sale to UNIVERSAL to be blocked outright, even if it offers to increase the divestments it is prepared to make. The same would apply to SONY if it buys EMI publishing."

The trade body’s statement continues: "The reason the EC forced divestments in its UNIVERSAL/BMG decision was because it found that UNIVERSAL controlled so much music it was bound to abuse its position, even with larger players such as APPLE. Due to the multiplier effect market power has on players who are already dominant, even a very small increase would severely harm competition. IMPALA takes the view that this means even significant divestments are not an option. The same applies to SONY if the rumors that SONY is going to buy EMI publishing are true.

"Arguments about the current state of the music market are unlikely to convince regulators they should change approach, in the opinion of IMPALA, since the impact of UNIVERSAL is one of the causes of market decline," IMPALA concluded. "In addition, both the EUROPEAN COMMISSION and the EUROPEAN PARLIAMENT have recently called for competition rules to be adapted to the specificities of the cultural sector, where the vast majority of innovation comes from smaller actors. In music, over 80% of all new releases are produced by the independents, or SMEs as they are referred to by policymakers. IMPALA is concerned that more time will be lost when the sector should be working together on other issues. IMPALA expresses regret that EMI will continue to languish and urges the regulators to act quickly to reduce the impact on EMI’s artists."

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