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Not My Pants, The Warner-EMI Merger
Speculators continue to speculate about the outcome of the proposed Warner Music Group-EMI merger.

Just when it looked like the deal may gain European Commission approval, reports out of Brussels say the regulatory body is prepared to block the joint venture despite the companies' last-minute attempts to save the deal by offering to sell Virgin Records and about 25% of their music publishing operations.

Simultaneously, EC regulators put together a 25-page draft decision to clear AOL's separate merger with Time Warner. In that recommendation, the commission said that it will block the EMI deal, a person who saw the document told the Wall Street Journal.

On Wednesday (10/4), the commission's antitrust department circulated a memo in which it said that it isn't considering any new proposals from the companies, the source said, meaning that the commission is standing by its earlier recommendation to block the deal.

An advisory council of national regulators will meet Thursday (10/5) to ponder both cases.

People familiar with the mergers said it is most likely that the companies can't do anything to sway the commission.

According to the Journal report, as of Wednesday, the companies hadn't submitted formal proposals that would have changed the commission's preliminary recommendation to block the deal. Last week, EMI offered to sell Virgin Records, but never officially, according to people familiar with the merger.

The WMG-EMI deal has been the giant hurdle holding up approval of the AOL-TW because of EC concerns that a giant AOLTWEMI could control the digital music distribution market.

The deadline for the companies to submit formal corrections was Sept. 18, one month before the final deadline for the commission to decide in the case of WMG-EMI. The deadline for the commission to decide on the AOL-TW deal is Oct. 24. The EC almost always makes its decisions at least a week before deadline and it is expected to decide on both deals on Oct. 11.

It appears that the only way for WMG-EMI to avoid a formal veto of the merger would be to withdraw notification of the deal and tear up the agreements before the commission makes its final decision, the paper said.

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