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EMI withdraws from Warner merger

27/07/2006

Music giant EMI has pulled out of its proposed merger with Warner Music amid fears that it could face the same fate of the annulled Sony BMG joint venture.

EMI, which boasts artists such as Robbie Williams, Pink Floyd and Coldplay, had made two approaches to unite with Warner Music since May of this year, the most recent bid being a £2.5 million offer in June.

But following on from the European court of first instance's decision last month to overrule the European Commissions' decision to give the go-ahead to a similar merger involving Sony Music and BMG in 2004, EMI had decided not to risk the same happening to its planned deal, despite claiming to have "good arguments for regulatory approval of a combination".

"Against this background, the board of EMI has decided not to pursue a combination with Warner Music for the time being. The board will review this position in the light of future developments," a statement said.

However, the music company still expects growth to continue regardless, and fully intends to deliver strong operating performance in this financial year.

The court of first ruled instance ruled last month that the commission's approval of the 2004 union, which created the world's second largest music company Sony BMG, did not demonstrate the required legal standard and must be re-examined.

Europe's second-highest court decided that the deal had not been placed under sufficient levels of legal scrutiny amid fears that the market could suffer from anti-competitiveness and artificially-high prices for consumers.

Japanese electronic goods giant Sony and German media firm Bertelsmann AG informed the EC that they were planning to merge in January of 2004, with the commission eventually approving the deal in July of the same year.

But six months later, Impala, a collection of independent record labels and production companies, applied to the court of first instance for annulment on the grounds that the creation of Sony BMG was unfairly dominating the market.

The ruling heavily criticised the commission for relying on the precedence of past retaliatory measures in its 2004 decision to approve the merger as well as "for having carried out an extremely cursory examination and for having presented in the decision only a few superficial and formal observations on that point".

But the court also criticised Impala, as it deemed the group's attitude was "scarcely compatible with the letter and the spirit of that procedure and slowed down the course of the proceedings". Impala has since been ordered to pay one quarter of the costs of the trial.

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