Universal Music Lines Up Buyers for Its Overseas Assets as Merger Scrutiny Continues

Universal Music Group has identified buyers for more than $650 million in assets, but will it be enough to mollify regulators investigating its EMI purchase?

Universal Music Group has identified nearly a dozen potential buyers for overseas assets it will sell to mollify European regulators poring over of its $1.9 billion purchase of EMI's recorded music division, TheWrap has learned.

Universal Music, owned by Vivendi SA, is looking to unload more than $650 million in overseas assets in the coming weeks. According to an individual with knowledge of the situation, those assets are music publishing catalogs deemed “non-essential" and some of its real estate holdings.

Universal is “in the process of identifying those non-essential music catalogs on a global basis that would be attractive for bidders,” the individual told TheWrap. Chances are they’ll “start reaching out to folks over the next couple of weeks.”

A Universal spokesman declined to comment on the asset sale.

The EMI deal is still subject to approval by European regulators. The European Commission announced on Friday that its investigation of the deal had entered its second phase, which was expected.

The commission is investigating whether the deal would have a negative impact on the music industry, reducing competition and giving Universal too much power.

Also read: Universal's $1.9B EMI Deal: In a Digital World, Market Share Counts For Less

“The proposed acquisition could reduce competition in the recorded-music market to the detriment of European consumers,” Joaquín Almunia, the commission’s vice president in charge of competition policy said in a statement on Friday. “The Commission needs to make sure that consumers continue to have access to a wide variety of music in different physical and digital formats at competitive conditions.”

Robert Levine, former editor of Billboard and author of "Free Ride," questioned whether the commission would be satisfied with sales on the publishing side.

"If you are trying to convince regulators that your recorded music dominance won't be a problem for the industry, are they going to be satisfied with selling off publishing? It's hard to see it," Levine told TheWrap.

Then again, "The fact that they are not trying to negotiate[ …] Vivendi knows what it's doing," Levine said. "They are pretty confident they can jettison enough to make it work."

Also read: Edgar Bronfman Vows to Fight Universal-EMI Merger 'Tooth and Nail'

Universal, which represents artists like Lady Gaga and Taylor Swift, would control almost 40 percent of the market if the deal went through. Adding EMI would bring on the likes of Katy Perry and Coldplay.

Edgar Bronfman Jr., the former chairman and CEO of Warner Music Group, is among those against the merger, in January vowing that he would fight it “tooth and nail.”

Bronfman, who sold the Warner Music Group to Russian-born billionaire Len Blavatnik in 2011, said the merger was “dangerous, problematic and has to be stopped.”

Universal, which promised to sell assets from the start, has been busy lining up potential buyers for assets it plans to unload. It has talked with overseas companies that might be able to profit more from certain music catalogs: A catalog of obscure European music might not have much of an impact on Universal’s bottom line, for example, but could be desirable to a smaller company with a stronger tie to that type of music.

As for the real estate, the individual said that it involved properties Universal has owned for some time that is has been leasing or left unused.

The company refutes arguments that the merger would consolidate too much power in one company. Indeed, many industry experts have pointed out that pure market share is not what it once was given iTunes, piracy and other changes in the industry.

“Phase II was always expected; we recognize that the Commission needs time to fully review this transaction," Universal said in a statement. "We will continue to co-operate fully with them and look forward to a successful resolution of the process.”

Impala, a consortium of independent European labels against the deal, on Friday said that it expects the opposite outcome.  It said that it “expects the second phase of the investigation to confirm the commission's initial conclusion that the merger would seriously impede competition in the music sector.”

The commission’s phase one findings on the second major EMI deal — Sony’s purchase of its publishing division — is set for April 2.