Universal Offers a Sweeping Sell-Off to Win Approval of EMI Purchase

By BEN SISARIO

In a significant retreat from Universal Music Group's ambitions of adding EMI's record labels to its already dominant position in the music market, the company has offered sweeping concessions to the European Commission, agreeing to sell the majority of EMI's holdings in Europe if the acquisition is approved.

According to an internal memo that Roger Faxon, the chief executive of EMI, sent to employees on Friday morning, shortly after Universal submitted its concessions package to the European regulators, the package includes the sale of Parlophone Records - the European home of Pink Floyd, Coldplay and the star D.J. David Guetta.

Also included are EMI's classical labels; its share of the profitable “Now That's What I Call Music!” compilation series; a number of the independent labels that EMI has absorbed over the years, like Mute, Chrysalis and Ensign; and at least seven of EMI's subsidiary operating companies throu ghout Europe.

By the estimates of two people briefed on the proposals, who were not authorized to speak about it, the assets divested could represent between 55 percent and 65 percent of EMI's annual revenue in Europe.

The concessions do not include EMI's greatest jewel, however, the recordings of the Beatles, as well as Virgin Records and EMI's flagship label, EMI Records, whose acts in Europe include Iron Maiden and Talking Heads. Nor do the concessions include rights to the music outside Europe.

But in another twist, Universal is also offering to sell a small number of its own assets, including Sanctuary, Co-Op, UMG Greece and a number of jazz labels.

Spokesmen for Universal and EMI declined to comment.

Such a large divestment of assets raises questions about the value of what Universal would ultimately be buying. According to its deal with Citigroup - which took over EMI last year after its previous owners, the private equity group Terra Firma defaulted on its debt - Universal assumed all regulatory risk for the deal and is scheduled to pay more than $1.7 billion of its full $1.9 billion purchase price by September, whether the deal is approved by regulators or not.

The European Commission has until Sept. 27 to rule on the deal.

Analysts have said that the more pieces of EMI that Universal has to sell at a lower price than what it agreed to pay for them, the more expensive the overall deal becomes for Universal and its parent company, the French conglomerate Vivendi.

Ben Sisario writes about the music industry. Follow @sisario on Twitter.