Font Size

- Aa +

Wed 18 Jul 2012 11:13 AM

Font Size

- Aa +

Qatar-backed Universal offers to sell EMI labels

Group says it will sell three EMI music labels if takeover goes through to ease competition concerns

Qatar-backed Universal offers to sell EMI labels
Universals stars include pop songstress Lady Gaga (AFP/Getty Images).

Universal Music Group, whose parent company Vivendi is part-owned by Qatar, will offer to sell three music labels belonging to takeover target EMI in a bid to ease European Union competition concerns over the US$1.9bn deal, two people familiar with the matter said Tuesday.

The European Commission has warned Universal that its plan to buy EMI's recorded music business will significantly impede competition, signalling a possible veto unless it offers major concessions, three people familiar with the matter told Reuters.

The combined company would be almost twice the size of its nearest rival in Europe, while Universal's global share of the recorded music market would rise to 36 percent from 26.5 percent.

Universal will offer to sell EMI's classical, jazz and Virgin Records labels, one of the people said, declining to be identified because of the sensitivity of the matter.

"The Commission prefers entire businesses to be divested," the source said.

The EU watchdog has set a September 6 deadline for its decision.

Universal's stars include Lady Gaga, Rihanna and U2 while EMI's recorded music catalogues include The Beatles and Katy Perry.

Last March, it was announced Qatar Holding had increased its stake in Vivendi, Universal Music’s Paris-based parent company to two percent, valuing its stake at around €354m (US$468.81m).

EMI seller Citigroup acquired the record label after its previous owner, buyout firm Terra Firma, defaulted on loans owed to the investment bank.

European Commission regulators asked rivals and consumer groups whether the Universal deal, and a Sony-led plan to acquire EMI's music publishing business for US$2.2bn, will result in higher prices and also shut out competitors.

A questionnaire sent by the European Commission and seen by Reuters asked whether artists would be able to switch record labels easily and at a reasonable cost once the two deals were completed.

Impala, a lobbying group for independent music companies, has urged EU regulators to block the deal.

“The impact of these mergers on artists is significant as their power will be reduced... [Artists] will find it more difficult to make a living, to get the best radio or TV slots, or get into the charts, or headline festivals, or make it onto the covers of magazines… unless they are signed to Universal,” Helen Smith, executive chair of Impala, told Arabian Business.

“It would basically mean you would have two companies deciding which artists are suitable for our children to listen to tomorrow and that is not the kind of message the regulators want to give,” she added.

* With agencies