Giant music merger collapses

EMI was thought to be frustrated with the regulatory process

The proposed merger between EMI and Bertelsmann has collapsed.

The link-up would have created the world's third largest music group and brought Bertelsmann signings including Christina Aguilera and Whitney Houston under the same roof as EMI's Robbie Williams and the Spice Girls.

Robbie Williams would have shared a label with Christina Aguilera

"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 EMI chairman Eric Nicoli.

"Our companies will now continue along their respective paths," Bertelsmann chairman and chief executive Thomas Middelhoff said.

Bertelsmann said preliminary talks had indicated regulators would impose "significant stipulations" before approving the merger, which might have removed the financial benefits of the deal to both sides.

Frustrated

It had earlier been reported that EMI was close to ending the talks because of the delay in gaining regulatory approval.

Reports said EMI investors had become frustrated with the regulatory process and were coming to regard it as an unwanted distraction.

Analysts say Bertelsmann had, for a long time, eyed a major position among music labels but had few possible acquisition targets.

Sounding out

EMI and Warner Music previously scrapped their plans for a £14bn merger after regulators looked set to demand a host of heavy concessions as the price for approving it.

Bertelsmann reportedly sounded out European Commission anti-trust officials about the implications of any deal with EMI before proceeding.

Bertelsmann Music

12,000 employees

Annual revenue $4.7bn

55% of revenue from North America

There are not thought to have been any formal talks with either the commission or the Federal Trade Commission in the US.

But, using consultants, lawyers and other intermediaries, Bertelsmann is believed to have argued that the issues that sunk the proposed EMI-Warner tie-up no longer applied, given big changes in the media industry in the past year.

Among these have been the creation of the giant groups AOL Time Warner and Vivendi Universal.

EMI shares climb

EMI and Bertelsmann had been thought to be making a final effort to satisfy regulators.

But it appears that they failed to come up with a deal which would be acceptable to both parties and also regulators.

EMI shares jumped 14 pence to 460p following the announcement that talks were off, before settling back to 450p by 1045 GMT.

Bertelsmann is 71.5% owned by a family foundation, with the remainder held by the Mohn family and the Zeit Foundation.