Universal Looking to Sell EMI Labels to Indies, Not Majors (Report)

European regulators have yet to approve Universal $1.9 billion takeover of the British music group.

COLOGNE, Germany – Universal Music Group plans to bypass its main rivals Sony and Warner and sell three music labels belonging to takeover target EMI to independent players, according to reports.

UMG is thought to be shopping around Virgin Records, EMI Classics and the distribution rights to independent label Mute – all EMI assets -- in a bid to reduce Universal and EMI's combined market share and so convince the European commission to approve Universal $1.9 billion takeover bid.

The Financial Times reports that UMG's French parent company Vivendi is looking to shut out UMG's two closest competitors, Sony Music and Warner Music, from the bidding process for the assets and is instead courting indie labels as well as private equity groups and music publishers.

Universal needs to make significant concessions, likely including assets sales, to get regulatory approval in Europe. Without disposals, Universal and EMI would together account for 40 percent of all music sold worldwide and a significantly higher proportion in many European countries. The deal would bring together Universal's roster of artists, including Lady Gaga, Rihanna and Take That, with EMI's stable, which includes Katy Perry and the Beatles. European regulators have warned they may veto the deal unless Universal sheds some of its assets.

When Universal bought EMI from Citigroup last November, the label assumed all regulatory risk in the deal. It had previously been thought that Vivendi would have to pay more than 80 percent of the $1.9 billion asking price by September, regardless of whether the takeover had been cleared.

But reports Monday suggested that, at Citigroup's request, the deadline has been pushed back to the end of November, giving Universal two more months to clear regulatory hurdles to the deal. In the United States, the Federal Trade Commission is also investigating the takeover.