EMI, Warner Merger Scrapped
October 5 -- LONDON (Reuters) — EMI Group Plc and Warner Music on Thursday abandoned their existing plan to create the world's largest music group after tough negotiations with Europe's competition authorities.
But Britain's EMI and Warner Music's U.S. parent Time Warner emphasized their belief that a merger made sense and said they would keep talking in an effort to reach a deal acceptable to regulators.
The two groups scrapped the current plan for a transatlantic joint venture, which would create a $20 billion music behemoth with a strong Internet presence, after they ran out of time to satisfy European anti-trust concerns.
The European Commission said the firms had offered proposals to address its objections, but only after the formal deadline for doing so had passed.
"EMI and Time Warner provided informal proposals that improved substantially the initial remedies," the Commission said in a statement, "but the Commission still had doubts and, in view of the late stage of the procedure, could not properly evaluate the undertakings."
An industry source familiar with the proceedings told Reuters that the events leading to Thursday's decision to withdraw the current proposal actually increased the likelihood they would strike a deal later on.
The commission had been due to hold a meeting of its advisory committee on mergers on Oct. 11, with Oct. 18 the deadline to decide on the proposed tie-up.
The new group, Warner EMI Music, would bring together a star-studded roster of artists and catalogs in a 50-50 joint venture including Madonna, Eric Clapton, and The Beatles.
And with Time Warner's planned $135 billion merger with Internet group AOL, the EMI venture would catapult the U.S. media giant into pole position for music distribution on the Internet. The commission is expected to approve the separate AOL deal and must rule on it by Oct. 24.
Analysts said the abandonment of the EMI-Warner deal could prove a setback for the entire "TMT" (telecoms, media, and technology) industry because EMI and Warner had been seen as a catalyst for its consolidation.
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