Universal Music Gets Japan's Approval for EMI Deal

After the green light in the world's second-largest music market, the company is now focusing on getting regulatory clearance in Europe and the U.S.


LONDON - Japan has approved Universal Music Group's planned $1.9 billion acquisition of EMI's recorded music business without concessions, with the music giant now focusing its energy on getting approval from European regulators.

"We can confirm that the Japanese Fair Trade Commission has unconditionally approved UMG's proposed acquisition of EMI Recorded Music," the music company, which is owned by Vivendi, said in a statement. "We are continuing to work constructively with regulators in other jurisdictions and look forward to clearance elsewhere in due course."

The approval in Japan is a key step as the country is the second-largest music market after the U.S.

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But UBS analyst Polo Tang said observers didn't really expect much of a challenge there given the combined entity's market share. "Japan was unlikely to be a major issue as the combined UMG/EMI market share there is circa 30 percent," he said.

New Zealand has also already given the green light for the deal.

The European Union and U.S. regulatory reviews are continuing and are expected to pose a bigger challenge.

The European Union previously sent UMG a statement of objections, to which UMG responded after getting a couple of extra days.

A source told THR that Vivendi and UMG have in recent weeks refocused their effort to win regulatory approval by signaling willingness to make concessions.

“I’m extremely open-minded about working with the [European] Commission in the context of behavioral remedies as well as divestitures,” UMG boss Lucian Grainge earlier this week told the Financial Times in his first interview since unveiling the bid in November. That signaled potential asset sales and promises about how the combined company would interact with competitors and handle such things as digital pricing, where critics fear it could have too much power.

UMG is also understood to have promised the European Commission that it would increase investment in developing new artists at its current labels and EMI.

Securing deal approvals is particularly important as Vivendi will have to pay Citigroup for EMI in September - whether it has received regulatory approval or not, Tang said.

"UMG is responsible for 10 percent of Vivendi operating profit, and the latest data released by Nielsen with the U.S. music market only down 0.6 percent in the first half of 2012 is encouraging," the analyst said. "We believe the UMG/EMI deal is a high risk/high reward deal as the music industry seems to be getting closer to a turnaround."

Email: Georg.Szalai@thr.com
Twitter: @georgszalai