Warner, BMG Step Up Music Merger Talks
By Merissa Marr, European Media Correspondent
LONDON (Reuters) - Warner Music and BMG, the music companies behind pop queens Madonna (news - web sites) and Christina Aguilera, are making a final stab at a merger after months of secret negotiations, sources familiar with the talks said.
After a decisive meeting in London, top executives from Warner Music, BMG and their parent companies have decided to step up negotiations to hammer out final terms of a recorded music joint venture, the sources said on Wednesday.
A Warner-BMG combination would create the world's second biggest music company behind industry giant Universal Music, bringing together artists ranging from Britney Spears and Alanis Morissette to REM and Santana.
"Both sides still want to do the deal and are moving ahead with talks," said one source familiar with the negotiations.
BMG's privately-owned German parent Bertelsmann and Warner Music's parent AOL Time Warner both declined to comment. BMG and Warner Music were not immediately available to comment.
By joining forces, Warner Music and BMG hope to keep a global industry downturn at bay by reaping cost savings of $250-$300 million between them each year, in a deal analysts say could be valued in the low single-digit billions of dollars.
The chairman of AOL Time Warner's entertainment and networks group, Jeff Bewkes, Bertelsmann finance chief Siegfried Luther and other key executives met in London on Tuesday to decide whether to continue talks over a deal, the sources said.
Sticking points remain but both sides agreed they had progressed far enough to push on with final negotiations.
DEAL THIS MONTH?
If there is a deal to be done, it will be done by the end of this month, other sources said earlier this week.
But fundamental issues such as valuation still need to be resolved, the sources said.
Putting a price on the two companies' recorded music arms to reach a 50-50 joint venture has proved far from easy.
A source familiar with the talks said last month that one side would have to put in cash or assets to reach an equal split. But negotiations have been complicated by the need to separate out music publishing operations and other businesses.
In terms of market share, Warner Music is the larger of the two, ranking just ahead of BMG as number four in the world.
However, industry data on Tuesday showed that BMG is catching up, lifting its global market share to 11.1 percent last year compared to Warner Music's 11.9 percent.
Even if the two sides reach an agreement, regulators could yet scupper a deal.
Two previous deals fell foul of regulators: one between Warner and EMI Group and another between BMG and EMI.
In both instances, anti-trust authorities made clear they would not accept further consolidation among the world's five biggest music companies.
The music industry has since been mauled by Internet downloaders and CD-burning. The two companies also hope that by excluding their music publishing operations, they may have a better shot at getting clearance.
However, they are prepared for regulatory investigations to last a good eight months, one source said last month.
