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"This is shutting the stable door when the horse has bolted"
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Thursday, 5 October, 2000, 12:29 GMT 13:29 UK
EMI, Time Warner abandon merger
Madonna in June
Madonna: one of the major artists in Warner's portfolio
US publishing giant Time Warner and UK music group EMI have ditched their $20bn merger plans, after last minute concessions failed to meet watchdogs' concerns.

The two companies on Thursday withdrew their application to the European Commission for permission to merge their music arms, stating they wanted more time to tackle objections to the tie-up.

EC competition officials were concerned that the tie-up between EMI and Time Warner's Warner Music subsidiary would have placed 80% of Europe's recorded music business in the hands of just four global giants.

The companies proposed selling record labels, music catalogues and distribution networks to meet the commission's concerns, and even considered selling off Virgin Records and Chappell Music, in an effort to meet the concerns.

But the EC said on Thursday that the concessions represented a "substantial" improvement, it "still had doubts, and in view of the late stage of the procedures, could not properly evaluate the undertakings".

Extra time

Eric Nicoli, EMI chairman, said: "The withdrawal allows additional time to reassess regulators' concerns and to pursue solutions simultaneously in Europe and the US.

The withdrawal allows additional time to reassess regulators' concerns

Eric Nicoli, chairman, EMI

"We have been and will continue to be flexible in responding to the EC's concerns.

But a special meeting of EC competition experts, who were to have discussed the tie-up, is still being held on Thursday to debate separate plans to merge Time Warner with the world's largest internet service provider, America Online.

A final ruling on the $135bn AOL and Time Warner merger, which would create the world's biggest combined internet and media company, is expected in about two weeks' time.

Creative mix

Richard Parsons, Time Warner's president, said the music tie-up would have united "two of the most creative and complementary organisations in the worldwide music industry".

The agreement would have set up a 50:50 joint venture, named Warner EMI Music, representing 2,500 artists including Madonna and the Rolling Stones, and producing around 2,000 albums a year.

EMI would have remained an independent company, with its own stock market listing.

Market forces

But the commission was concerned that the deal, by leaving just four major record labels in Europe, would allow the remaining players to exercise "collective dominance" over the market.

EMI headquarters in London
EMI: deal would allow cost savings

Universal Music, Bertelsmann and Sony Music are the three other main players.

Mr Parsons on Thursday said Time Warner would pursue the EMI tie-up because of its potential "to deliver extraordinary dividends to our artists, employees, shareholders and music lovers around the world".

Mr Nicoli said the merger would provide "the opportunity to generate considerable cost savings and to build a unique, Anglo-American owned music company".

City analysts speculated that the firms might still pull off a tie-up, even a limited deal involving perhaps distribution and internet developments.

Other observers sought alternative partners for EMI, proposing Disney, Sony and Microsoft as potential bidders.

EMI shares stood 33p, or 6%, lower at 525.6p in lunchtime trading in London.

Mega merger

The Time Warner-AOL merger, even if allowed by European officials, will still require approval from US competition authorities if it is to go ahead.

The Federal Trade Commission has said it wants to see AOL and Time Warner agree to share their high-speed cable networks.

In Washington, the Federal Communications Commission (FCC) - also looking at the merger - has begun looking at possible regulations for the internet.

The FCC is considering whether it should order cable companies to allow competing internet service providers on their networks.

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See also:

22 Sep 00 | Business
AOL/Time Warner concede to EU
21 Sep 00 | Business
EMI confident of EU clearance
28 Jul 00 | Business
AOL, Time Warner defend merger
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