California Attorney General Kamala Harris is probing the planned purchase of EMI Group by Vivendi SA (VIV)’s Universal Music and an investor group led by Sony/ATV Music Publishing, two people familiar with the inquiry said.
Harris’s office has contacted customers and competitors of EMI, Universal Music and Sony/ATV about the effect the deal may have on pricing, said the people, who weren’t authorized to speak publicly about the probe. The state began seeking information in late February to determine whether the $4.1 billion transaction would violate antitrust rules, one of the people said.
The investigation adds scrutiny to a sale that’s already under review by the U.S. Federal Trade Commission and the European Union. Universal Music, the world’s biggest record company, is buying EMI’s recorded music unit for $1.9 billion. Sony/ATV, a joint-venture of Tokyo-based Sony Corp. (6758) and the estate of Michael Jackson, is purchasing EMI publishing for $2.2 billion and would become the world’s biggest music publisher.
Lynda Gledhill, a spokeswoman for Harris, said yesterday the office doesn’t discuss whether specific cases are being investigated, as a matter of policy.
Warner Music Group, owned by billionaire Len Blavatnik’s Access Industries Holdings Inc., opposes the EMI sale, Warner board member Edgar Bronfman Jr. said earlier this year.
Universal Music would gain rights to albums from EMI performers including the Beatles, and Sony/ATV would add copyrights to songs and songwriters at EMI, including Beyonce and Jay-Z.
The Sony/ATV-led group offered compromises to European regulators examining the acquisition, according to a filing yesterday on the European Commission’s website that didn’t provide specific details. The commission extended its deadline to rule on the deal until April 19. The group also extended its review of Universal Music’s EMI purchase.
Investigators and competitors have expressed concern that the combined companies will have too much control over prices and access to songs. Universal Music has 27 percent share of the recorded music industry, and EMI accounts for 12 percent, according to data from the IFPI music industry association cited by Sanford C. Bernstein analysts.
In publishing, Sony makes up 13 percent of the market and EMI 20 percent. Universal, which isn’t buying publishing assets from EMI, is the dominant company with 23 percent.
Universal Music plans to sell three music-publishing catalogs to raise about $200 million to help finance its EMI acquisition, a person said this week. Universal Music hired Bank of America Merrill Lynch to sell classical, Christian and German schlager catalogs, said the person, who wasn’t authorized to speak publicly.
Universal’s parent, Vivendi, has said it will raise 500 million euros ($668 million) to finance the deal. Chief Financial Officer Philippe Capron said this month that the company plans to complete the divestments by the second half.
EMI, the 114-year-old music company that owns Abbey Road Studios in London, was seized by Citigroup Inc. (C) in February 2011 after falling out of compliance with debt covenants, and subsequently sold.
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