Universal Music’s €1.63bn ($2.2bn) takeover bid for BMG’s music publishing arm is set to win regulatory backing from the European Union’s top antitrust watchdog later this month, according to people familiar with the deal.
The European Commission opened an in-depth investigation into the takeover in December, when Brussels said it had “serious doubts” over its potential to undermine competition in the music publishing market.
However, Universal is understood to have smoothed the regulator’s initial concerns by offering to sell the rights to songs by artists including Britney Spears, Bryan Adams, the Spice Girls and Dire Straits as well as the theme tunes to popular BBC programmes such as Bob the Builder and Teletubbies.
The Commission still has until June 1 to issue its final verdict, and its decision to clear the deal has yet to be approved by national competition regulators. But in the vast majority of mergers the watchdogs’ backing has been little more than a formality. In any case, antitrust experts said the Commission would not have sufficient time to block the deal, since this would require issuing formal objections and giving the groups the chance to stage a hearing in Brussels.
Neither the Commission nor Universal were ready to comment on the decision, but a spokesman for the music group said: “We are continuing to work closely with the Commission and remain confident of clearance.”
Universal’s concessions are unlikely to please the deal’s opponents – primarily the independent labels – which had urged the Commission to impose tougher conditions on the tie-up. But people familiar with the case said the Commission would only ask Universal to divest the string of music catalogues that it had proposed in talks with Brussels over recent months. These are the rights held by Zomba UK, 19 Music, Rondor UK and the BBC catalogue, which together cover a range of artists from indie band Kaiser Chiefs to veteran rockers Iron Maiden.
The appetite for publishing catalogues could prompt interest from groups including EMI, Sony ATV and Sony BMG, as well as the long list of financial buyers who examined BMG Music Publishing before Universal won last summer’s auction.
The news from Brussels comes as renewed bid speculation surrounds EMI. The London-listed group’s attempt to combine last summer with Warner Music fell apart after the Court of First Instance called for a re-examination of the Commission’s 2004 clearance of Sony Music’s merger with BMG’s recorded music division.
Although regulators have treated music publishing as a distinct industry from recorded music, many analysts and executives have been looking to the Commission’s ruling on Universal/BMG for signs of its readiness to allow further consolidation in recorded music.