The European Union's antitrust regulators have approved Sony Corp.'s $2.2-billion acquisition of EMI's publishing business, clearing a major hurdle in Sony's ambition to create the world's largest music publishing group with rights to about 2 million songs, including some by David Bowie, Stevie Wonder and Pink.
The deal announced Thursday still needs to clear U.S. regulators, who have historically been more lenient than their European counterparts. Nevertheless, antitrust experts cautioned against celebrating too soon.
"The EU is traditionally a higher hurdle to merger approval than U.S. agencies, but the [Federal Trade Commission] has been more active of late," said Mark A. Lemley, an antitrust professor and the director of Stanford Law School's Program in Law, Science and Technology. "I expect they will approve the merger, but it's not a done deal."
An FTC spokesman declined to comment.
U.S. antitrust regulators could oppose the transaction in court if they believe that the deal would restrict competition and harm consumers or, in a scenario similar to the EU, request that the parties divest assets to dilute the combined company's market power.
In exchange for the EU's blessing, for example, Sony agreed to sell off several European-based assets that together would have accounted for less than 5% of the merged company's revenue, said several executives close to the discussions who did not want to be named because they were not authorized to speak publicly on the matter.
The merger calls for Sony's music publishing subsidiary, Sony/ATV, to administer the EMI catalog on behalf of a consortium of investors, including Blackstone Group, Mubadala Development Co., the estate of Michael Jackson, GSO Capital Partners and veteran music and movie mogul David Geffen. Sony itself would be a minority partner.
Geffen's involvement, his first major investment in an entertainment company since co-founding DreamWorks SKG in 1994, came in the nick of time last fall as Sony struggled to pull together financing for the deal. When a global credit shortfall forced Mubadala to pull back some of its investment, Geffen jumped into the breach in late October, days before Sony's offer was due, according to executives knowledgeable about the transaction.
Geffen, 69, has had a long and successful career in the music industry, though he has not made any sizable investments in entertainment in years. He founded Asylum Records in 1970, followed by Geffen Records in 1980, which released John Lennon's "Double Fantasy" album as well as works from Elton John, Peter Gabriel and Nirvana.
Geffen left the record company to co-found DreamWorks SKG with filmmaker Steven Spielberg and former Walt Disney Studios chief Jeffrey Katzenberg in 1994, but was recently drawn back into the music business by Rob Wiesenthal, who was Sony's point man for arranging the financing deal.
Wiesenthal, who is president of international at Sony/ATV, declined to comment. Geffen did not respond to a request for an interview.
Sony said in a statement that it "looks forward to successfully concluding the other regulatory review processes that are underway in other regions."
Martin Bandier, chairman and chief executive of Sony/ATV Music Publishing, said: "Having spent over 17 years of my professional life helping to build EMI Music Publishing, today is not only an important milestone on the path to final approval, but a very special day for me personally."