WMG, BMG FORGING AHEAD

Insiders are now saying a joint-venture agreement between Roger Ames’ Warner Music Group and Rolf Schmidt-Holtz’ BMG could be announced by the end of September, if not sooner. As this latest rumor makes the rounds, however, observers are saying that the issue now most likely to slow things down is structure, not valuation.

While the two sides agreeing on equitable valuations for the two companies—in order to agree on what assets will make up a proposed 50-50 joint venture—is still a challenge, execs close to the action say there are questions, including who will preside over the venture, whose CFO will crunch the numbers and who will pick the teams to run the various territories, that loom even larger. Some are saying that the valuation game could be connected to structure questions in a kind of negotiating dance, whereby “org chart futures” could very well impact valuation issues.

Just how far along the two parties are in arriving at a 50-50 agreement is still unknown, but both sides are said to remain highly motivated to make it work, given that a reported cost savings of $250-$300 million per year would be the result of a successful deal.

And while insiders are saying the two companies are no longer very far apart on valuation and could make quick progress in determining structure, the next step following a deal—passing regulatory muster—could still be tricky.

That hurdle could reportedly take as long as eight months and could involve the disposal of major assets, including one or more record labels.

Reports are now circulating that EMI, as previously rumored, will be a likely bidder on any labels WMG or BMG may put up for sale. As reported here, EMI is said to have already made a $750 million offer for 75% of WMG’s recorded-music business.

On the regulatory front, however, the Financial Times reports that Impala, a trade group representing 1,800 independent European labels has asked the European Commission to block a WMG/BMG merger. Others, members of the current Big Five, are expected to register objections to the merger, should one materialize, during the approval process.