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News > Deals
Time/EMI awaits ruling
October 5, 2000: 12:12 a.m. ET

EU, U.S. regulators prepare final reviews of Time Warner-EMI-AOL deals
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NEW YORK (CNNfn) - Thursday could mark the beginning of the end for the proposed $20 billion joint venture between Time Warner Inc.'s music business and EMI Group PLC as the European Commission's antitrust division is reportedly about to recommend that the deal be blocked.

The Commission Wednesday postponed ruling on Warner Music-EMI, although a separate approval on America Online Inc.'s proposed acquisition of Time Warner appeared to be gaining speed on both sides of the Atlantic.

A spokesman for the Commission's competition commissioner Mario Monti told reporters Wednesday: "The Commission has not taken any decision yet in either case. No draft decision has yet been circulated." An advisory committee to the full Commission, the executive arm of the 15-nation European Union, is expected to discuss the proposed deals Thursday.

graphicThe Wall Street Journal's interactive edition reported Wednesday afternoon that the Commission was preparing to block the $20 billion Time Warner/EMI joint venture despite an apparent last-minute offer from the companies to sell Virgin Records and a significant portion of their music publishing catalog.

The Journal, citing sources familiar with the situation, said the Commission's antitrust division told regulators expected at Thursday proceedings that it is declining to accept new proposals related to the Time Warner/EMI venture, hinting that it intends to stand by its earlier recommendation to block the deal.

Ultimately, the antitrust division's recommendation, which will formally be presented Thursday, is just that, meaning the Commission can decide whether to follow it or go against it. However, such recommendations are generally considered a good measuring stick of how the full Commission will vote.

The Commission warned in June it had grave doubts over the EMI-Warner deal because of the possibility it would create a dominant force in the online delivery of music. The proposal to merge Time Warner, the parent company of CNNfn, with AOL only added to these concerns.

The EU also voiced fears that the music companies' merger would reduce the number of global players in the music industry from five to four. The others are Seagram, Bertelsmann and Sony.

A spokesman for Richard Branson's Virgin Group told CNNfn Tuesday it would probably be interested in buying back the Virgin Records label if it was made available. Virgin Group sold Virgin Records to EMI for $960 million in 1992.

The Commission, has until Oct. 18 to rule on the Warner-EMI joint venture, and until Oct. 24 to rule on the $125 billion merger of Time (TWX: Research, Estimates) and AOL (AOL: Research, Estimates). It has indicated it will rule on the music venture by next Wednesday, Oct. 11.

Online music threat


Still, despite reports of the EMI venture's demise, confidence seemed to be building on both coasts that AOL's $122.6 billion purchase was nearing final approval from a number of regulatory agencies, including the EU.

Both the U.S. Federal Communications Commission and the U.S. Federal Trade Commission are due to rule on the proposed union by mid-October. Although recent press reports have suggested that U.S. regulators are still seeking stronger concessions from both companies on such issues as open access to cable lines and set-top boxes, investors appear to displaying a higher comfort level with the deal.

America Online shares closed up $3.41, or 6.2 percent, to $58.76 Wednesday, while Time Warner rose $4.99 to $86, a sign that arbitrageurs are feeling more confident about the merger.

Industry analysts likewise jumped on the bandwagon.

graphic"We believe AOL and Time Warner are in the final stages of gaining approval from U.S. and Europe regulatory commissions," said Henry Blodget, an analyst with Merrill Lynch. "We do expect any concessions that would materially impact future performance."

A source close to the U.S. negotiations said federal regulators were expanding their review of the AOL-Time Warner merger to include the combined company's ability to control Internet access via set-top boxes, which connect television sets to the Web.

However, the source said the issue was not "a deal breaker," hinting it would not likely halt final approval of the deal.

Time Warner and AOL unveiled their merger plan in January this year, and a joint venture combining Warner Music and EMI's music operations was unveiled a short time later. U.S. regulators have yet to rule on both deals, although the EMI deal is expected to draw little opposition in the United States.

EMI (EMI) stock rose 2.3 percent to 557 pence in London Wednesday.

CNNfn's London bureau contributed to this report. Back to top

  RELATED STORIES

AOL, Time Warner offer concessions to EU regulators - Sep. 22, 2000

Time Warner, EMI ink deal - Jan. 24, 2000

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.