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Since the beginning of 2008, the EC has approved 25 of the last 27 mergers that moved to a Phase II.
A DONE DEAL? I.B. BAD ON UMG-EMI
Why Are Those Involved in the Deal So Confident of Its Eventual Approval by the EC, and Why Is Len Blavatnik So Determined to Kill It?
Is the UMG-EMI merger in the bag? According to insiders, executives at both companies adamantly believe the deal will get the green light, and that the pairing will be formally approved sometime around Aug. 8, the designated date for the European Commission to render its decision after completing Phase II of its investigation into the deal.
 
The smart money is on a positive ruling, despite the EC’s recent announcement that it will continue its “in-depth investigation” into the proposed merger. While the Commission's initial findings indicate that the “proposed transaction may raise competition concerns in the wholesale of physical and digital recorded music in numerous Member States as well as in the European Economic,” the opening of an in-depth inquiry doesn’t prejudge the final result of the investigation. Since the beginning of 2008, the EC has approved 25 of the last 27 mergers that moved to a Phase II. 
 
As UMG insisted in a statement, “Phase II was always expected; we recognize that the Commission needs time to fully review this transaction. We will continue to co-operate fully with them and look forward to a successful resolution of the process.” But EC VP in charge of competition policy Joaquin Almunia cautioned: “The proposed acquisition could reduce competition in the recorded music market to the detriment of European consumers. The Commission needs to make sure that consumers continue to have access to a wide variety of music in different physical and digital formats at competitive conditions.”

Universal executives were encouraged by the fact that the Commission didn’t raise such red flags as “serious doubt” or “significant concerns” in the language of its press release, nor did it indicate that the transaction would result in the “removal of a strong competitor,” which is how the EC typically describes a horizontal merger.
 
Clearly, UMG is deeply committed to its $1.9 billion acquisition of EMI, and will make whatever divestitures are needed, especially in Europe. Specifically, the company will do everything it can to prevent EMI from going to Warner Music, whose Len Blavatnik has been vocal in his threats to derail the merger at all costs, with hopes of picking up EMI at a bargain price if the merger doesn’t go through (which now seems even more unlikely than ever).

Insiders liken WMG’s desire to kill the merger by way of a direct attack on UMG to Terra Firma’s last-ditch attempt to avoid Citibank foreclosure. The same mistakes Guy Hands and his financial advisers made are being played out at Warner, which has experienced a nearly two-decade fall from grace since the death of Steve Ross and the clueless the mid-’90s Morgado/Fuchs era. Now, many believe another potential disaster awaits the beleaguered company in the sense that there’s no upside for Blavatnik in becoming Universal’s worst enemy. As one source noted, acquiring EMI is both business and personal for UMG boss Lucian Grainge.
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