Universal Music Group, already the world’s largest music label, obtained on Friday the European Union’s approval to become even bigger with its $1.9 billion bid to take over Britain’s famed EMI Music.
The merger will bring together works by contemporary artists like Lady Gaga and Snoop Dogg under one umbrella, but will require Universal to sell off BMI’s Parlophone Records, which holds rights to some works by historic mega acts including Queen, Morrissey and the Beastie Boys. Universal will, however, get to keep the granddaddy of all library of recording rights: The Beatles.
The victory is bittersweet because Universal, a division of Paris-based telecommunications and entertainment giant Vivendi SA (EPA:VIV), must spin off EMI’s most lucrative assets as a condition set forth by the EU’s anti-trust regulator in Brussels. The divestments represent about $450 million in annual revenue in the EU market alone, according to Dow Jones, but the deal still leaves Universal hiking its share of the global music market from 30 percent to about 40 percent, according to various media estimates.
The move will knock down the so-called “big four” record labels that control most of the world’s music rights to just three: Universal, Sony Music Entertainment, owned by Tokyo-based Sony Corporation (NYSE:SNE), and New York-based Warner Music Group, owned by Time Warner Inc. (NYSE:TWX).
“Competition in the music business is crucial to preserve choice, cultural diversity and innovation,” Joaquín Almunia, the European Commission’s top anti-trust regulator, said in the statement announcing the condition-laden approval.
In addition to selling off Parlophone, Universal will also have to shed numerous EMI’s smaller labels, such as Virgin Classics, BMI’s classical music label and Chrysalis, which holds or had held rights to some music from lucrative artists like Jethro Tull, Procol Harum and Blondie.
The approval opens the way for Universal to market and license a vast category of music in Europe. The U.S. Federal Trade Commission is expected to announce its decision on the deal in the coming days, according to The New York Times. Universal will also have to sell some of its own assets, including the British label Sanctuary Records Group and Co-Op Music.
Universal had announced its intention to buy EMI in November after Warner Music backed down. EMI was acquired by Citigroup Inc. (NYSE:C) in February 2011 after London-based Terra Firma Capital Partners Limited lost control of the company it acquired in 2007. After EMI fell to the private equity firm, acts including The Rolling Stones dropped the label.