ALL TALK, STILL NO ACTION FOR BERTIE, EMI

The New Year will bring continued merger negotiations between Bertelsmann and EMI, but regulatory issues are expected to remain a problem.

Said Bertelsmann CEO Thomas Middelhoff at a press briefing in Frankfurt: "One should not expect a result before the end of January."

According to industry sources, the two music companies face numerous regulatory hurdles, which will make it difficult to construct a deal acceptable to regulators. The European Commission is concerned the merger would reduce the number of major music labels from five to four. That same sentiment helped to unravel EMI's proposed merger with Warner Music Group back in October. Analysts say the creation of a fifth label by EMI and Bertelsmann could prompt approval. Hmm…

Said one source: "We won't know if the deal is possible until we get final feedback from regulators. It's still early days with the regulators."

Under the proposed merger, Bertelsmann would fold its BMG music assets into EMI, paying EMI shareholders a special dividend in return for a controlling stake.

While EMI has said talks are continuing with WMG, analysts believe a deal that meets regulatory approval would be too watered-down to be attractive. Middelhoff said his company was negotiating exclusively with EMI.