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Merger between EMI and BMG scrapped

Written by DanJKroll on May 1, 2001 to .

The planned merger of EMI, the world’s third largest music company, and Bertelsmann’s BMG has been scrapped. The deal was scuttled today in London after it became clear that regulatory hurdles were too high to clear. The merger would have created the world’s largest music company.

  EMI, whose artists include Roxette, Mariah Carey and the Beatles, reportedly would have had to shed various portions of their company before being allowed to acquire BMG. BMG’s artists include David Bowie and Whitney Houston.

  In its second failed merger attempt in a year, EMI said on Tuesday the two companies had decided to go their separate ways after regulators appeared ready to demand each sell too much of its business to make a deal worthwhile.

  “After exhaustive analysis and discussion, we have been unable to find a deal with Bertelsmann which works both for shareholders and for the regulators,” said Eric Nicoli, EMI’s chairman. It was the same problem EMI faced when it tried to merge with Warner Music last year.

  Ever since it demerged from electronics company Thorn in 1996, EMI has been at the center of takeover rumors which have linked the company to heavy hitters such as Disney, Yahoo and Rupert Murdoch’s News Corp.

  EMI is the only one of the five music majors not to be a part of a big media empire and analysts said it would be an attractive morsel for a media conglomerate not yet armed with music assets.

  The collapse of talks is a major blow to Nicoli, who was brought in to shake up a sagging EMI in 1999 and look into the prospect of finding the 100-year-old group an eligible partner.

  Attempting to paint a rosy picture of life alone, EMI also published highlights from its full-year results due on May 22, reporting a 6 percent rise in pre-tax profit to 260 million pounds ($371.6 million) on sales of almost 2.7 billion.

  In its drive to push the EMI merger through, Bertelsmann had been trying to convince regulators that the media landscape had changed dramatically, and that the rise of the Internet had created far more competition for the world’s five music majors.

  EMI and Bertelsmann had been sounding out regulators before committing to a formal proposal to avoid dragging EMI’s shareholders through another damaging antitrust investigation.

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