Wednesday, April 18, 2012
Brussels’ Demands Are Modest, With Only 2%, or $25 Million, of the Combined Companies’ Assets Earmarked for Divestiture
Sony and its investment partners have been given the green light from the
European Commission for their $2.2 billion purchase of
EMI Music Publishing a day ahead of its scheduled ruling, the
Financial Times reports. And the Commission’s stipulations will cause minimal pain to the principals. The decision will be announced tomorrow.
The Commission’s main reservations over the merger regarded the licensing of the combined group’s Anglo-American repertoire to online platforms in the U.K. and Ireland. Sony addressed this specific issue with a commitment to shed the global rights to EMI’s
Virgin and
Famous Music U.K. catalogs, as well as those of a few contemporary songwriters.
The proposed sell-off, which amounts to slightly more than 2% of the combined group’s revenues, worth about $25 million, falls well short of demands from
Warner Music and
Impala.
The EU decision is seen as the most important step in the process of winning global approval for the EMI deal. The consortium is still seeking regulatory clearance in the U.S., Australia and Brazil.
Sony’s competitors hoped Brussels would take the tough line it adopted in 2006 for
UMG’s purchase of
BMG Music Publishing, which forced the sale of catalogs including
Zomba,
19 Music and the
BBC. But in this case, the Commission didn’t take Sony’s recorded music business into account, partly because the Sony-led consortium’s structure will keep EMP at arm’s length from Sony/ATV.
Sony was also able to convince officials that its power would be checked in music publishing because pricing is largely set by national collecting societies and market clout has shifted to big online players like
Apple.
Sony’s original offer to remedy competition concerns was rejected as unsatisfactory on the basis of feedback from rivals. The consortium responded by including U.S. rights in the sell-off package and adding a few contemporary songwriters with recent releases.
Once the transaction is complete, Sony would account for about 25% of global music publishing sales.
Sony will put about $325 million in equity into a new venture backed by less than $100m from
David Geffen. Other backers include
Mubadala, an Abu Dhabi fund;
GSO,
Blackstone’s leveraged loan business; and Swiss bank
UBS.