EU approves Sony Music-BMG merger

Sony Music confirmed that the European Commission has approved its planned merger with the music arm of Germany’s Bertelsmann.

The music group will be the second largest after Universal
The music group will be the second largest after Universal

The proposed merger between Sony’s music arm and Bertelsmann music business BMG would bring together Sony stars such as Barbra Streisand and Beyonce with the likes of Elvis Presley and Christina Aguilera in the BMG catalogue.

Their combined share of the global music market would be about 25%, making it the world’s second-largest music group after Vivendi’s Universal, said a spokesman for Sony Corp.

The only other two major global players are Warner and EMI.

“We appreciate the European Commission’s diligence in reviewing all of the various aspects of the joint venture,” Sony Music Entertainment Chief Executive Officer Andrew Lack said.

After clearing the European hurdle, the German-Japanese tie-up still needs to win approval from the US Federal Trade Commission within days. Lack said the company was working with US regulators to secure it.

“We’re also pleased that they have recognized that the creation of Sony BMG is an appropriate and necessary response to current market conditions”

Andrew Lack,
Sony Music Entertainment CEO

The Japanese and German parent groups had made the case to Brussels that their businesses needed to join forces to tackle the crisis in the global music industry faced with both pirate CDs and an explosion of illegal music downloading.

BMG is in a strong position as it prepares for the tie-up. It posted record operating profits of 30 million euros ($37.4m) in the first half of this year, Spiegel magazine reported in its latest edition.

The result, the best six-month figures in its history, puts BMG in a strong position for negotiating the deal with Sony Music, with the two sides expected to meet this week on a reorganisation after the Brussels decision.

The latest case of media consolidation comes at a cost. According to reports, Sony and BMG plan to axe a quarter of their joint workforce, or 2000 jobs, once the tie-up has been approved.

At Sony BMG the overhaul will produce one-off charges of $300-350m, mainly covering severance terms for a large portion of the group’s employees, the Financial Times reported last week.

Executives hoped to achieve 85% of the cutbacks by next June, it added, but detailed work on cost-cutting would begin only after competition authorities cleared the merger, which would be a 50:50 joint venture.

Lack’s statement was issued during morning trade on the Tokyo Stock Exchange.

Parent Sony Corp’s shares ended the day 2% lower at
3910 yen as the benchmark Nikkei 225 index dropped 1.55%.

Source: AFP

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