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"I can't see a situation where a forced sale of Virgin would be beneficial to EMI shareholders unless it was part of a bigger deal that would enhance value."
—Michael Gifford of Canada Life Asset Management

WILL WEMI’S VIRGIN HELP CONSUMMATE THE MERGER?

But Investors Might Not Be Excited
About The Virgin Sacrifice
Warner Music Group and EMI's proposal to sell Virgin Records, seen as a last-ditch effort to save its planned merger, could appease European antitrust regulators opposed to the deal, some competitors said.

As first reported here (hitsdailydouble.com, 9/27), Time Warner head of music Richard Parsons, WMG chief Roger Ames and EMI topper Ken Berry last week floated the idea of selling off Virgin Records and the Chappell part of music publisher Warner/Chappell in an attempt to secure European Commission approval of the deal.

"The idea of Virgin becoming available might be the kind of radical solution the commission is looking for," Philippe Kern, secretary general of the Independent Music Companies Association, a trade group representing independent music companies, which has lobbied against the merger, told Bloomberg News Service.

Obviously, all parties involved decline to comment on the record about anything relating to merger matters. However, sources familiar with the situation said the deal now has a "50-50" shot of gaining approval.

"Many investors will be very disappointed to see [these] developments," said Michael Gifford of Canada Life Asset Management. "We thought this deal would go, albeit with a few small divestments. I can't see a situation where a forced sale of Virgin would be beneficial to EMI shareholders unless it was part of a bigger deal that would enhance value."

The commission's main problem with the link between WMG and EMI is that it would take the industry down to four majors from five, a problem that antitrust lawyers have said is difficult to solve. And, when AOL, which is in the process of purchasing TW, is brought into the mix, the uncertain future of online music distribution comes into play.

The advisory committee of EU antitrust experts will meet again next week to examine any new concessions and further analyze the AOL-TW transaction. The commission must rule on the merger by Oct. 18.

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