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"We are delighted that the European Commission has decided to approve the creation of Sony BMG without imposing any conditions."
——Rolf Schmidt-Holtz, Sony BMG Chairman

EU SAYS SONY BMG A DONE DEAL

Merger Reduces Music Companies from Five to Four
Get ready for the music business' version of the Axis.

As expected, the European Union approved without any conditions the merger of BMG and Sony Music, one day ahead of a planned announcement from competition authorities.

Combining the recorded music businesses of Bertelsmann and Sony Corp. will create the world's second-largest music company, behind Vivendi's Universal Music, with revenues between $4.5 and $5 billion.

The company will be named Sony BMG and will include a wide array of artists, including Bruce Springsteen, Bob Dylan, Beyonce, J.Lo, Justin Timberlake, Christina Aguilera and Britney Spears. The proposed merger does not include the music publishing units of either company, Sony's Japanese arm or its CD manufacturing business.

"We are delighted that the European Commission has decided to approve the creation of Sony BMG without imposing any conditions," BMG Chairman/Chief Executive Rolf Schmidt-Holtz, who will become Chairman of Sony BMG, said. "We now look forward to completing the deal and concentrating on the successful integration of the two companies."

Commission officials were not immediately available to comment, though approval has been widely expected since EU's approval was tipped last month.

Sony and Bertelsmann have argued that difficulties in the music industry, which is facing declining sales of CDs and illegal downloading, necessitated the merger.

"We appreciate the European Commission's diligence in reviewing all of the various aspects of the joint venture," said Sony Music Entertainment Chairman/CEO Andrew Lack, who'll become CEO of the combined company. "We're also pleased that they have recognized that the creation of Sony BMG is an appropriate and necessary response to current market conditions. We're currently working closely with U.S. regulators to underscore the fact that this new company will be dedicated to serving the needs of its artists, while at the same time enriching the lives of music lovers around the world."

The combined group is expected to cut more than 2,000 jobs or about 25 per cent of its workforce following completion of the deal.

The overhaul, expected to cost more than $300 million in one-off charges, is due to deliver annual savings of about $350 million. The two companies have already identified $70-$80 million of savings from areas such as real estate, human resources and IT systems.

The deal still requires approval from U.S. regulators at the Federal Trade Commission, who are expected to reveal their decision as early as tomorrow, when the EC makes its formal announcement of their decision.

FTC spokesman Mitch Katz would not comment on speculation. "The commission hasn't even confirmed that we're looking at this transaction," he said.

The deal was opposed by independent record producers and retailers, but Competition Commissioner Mario Monti and his staff decided that the original arguments against the deal would not stand up before the European Union's Court of First Instance in Luxembourg.

The court has thrown out three commission prohibitions, deciding that the commission failed to prove its cases.

At two days of closed hearings earlier this year, where Sony, BMG, their critics and their allies aired views, one lawyer warned the Commission of the high standards of proof set by the court.

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