NEW YORK, Jan 23, 2000 (AP Online via COMTEX) -- Time Warner, which
just two weeks ago announced a $145 billion merger with America Online,
is expected to reveal plans today to merge its music division with EMI
Records, which has rights to stars such as the Beatles and the Rolling
Stones.
The deal would be worth some $20 billion, a source familiar with
details told The Associated Press. The formal announcement will be made
in London, said the source, who spoke on condition of anonymity.
London-based EMI confirmed Sunday that it is in the final stages of
negotiations and said an announcement is forthcoming. Time Warner in
New York also acknowledged the talks, but spokesman Edward Adler said,
'No deal has been signed.'
The deal, if approved by regulators and shareholders, would likely be a
boost for music sales over the Internet. Both Warner and EMI have been
testing ways to let customers digitally download music via their
computers.
The new company would have a very captive audience with America
Online's 20 million subscribers.
The merged company, to be called Warner EMI Music, would be the
second-largest music company with more than $8 billion in annual sales.
Only Seagram's Universal Music would be bigger.
The announcement could draw fire from critics who worry that lack of
competition will diminish diversity and put too much control in the
hands of the four industry titans: Universal Music, Warner-EMI, Sony
and Bertelsmann.
EMI brings to the deal the Virgin, Priority and Capitol record labels
-- including names like the Spice Girls, Van Morrison and Frank
Sinatra. Time Warner contributes its Atlantic, Elektra and Warner
Brothers labels that include Cher, Eric Clapton, Phil Collins, Madonna,
Metallica and REM.
According to the source, the negotiations between Warner and EMI
started before powerbrokers discussed Time Warner's deal with America
Online. Roger Ames, chairman of Warner Music Group, approached his
longtime friend Ken Berry, head of EMI's music division, in the fall.
The two structured a deal in which Warner will pay EMI shareholders
about $1 billion, or about $1.65 a share, in exchange for 50 percent
ownership in the combined company, the source said. Warner also will
have six seats on the new board of directors, and EMI will have five.
The merger is expected to close in about a year.
This 'represents an opportunity to establish the world's premier music
group and to create very considerable value for shareholders of both
companies,' EMI said in a statement.
Ames will be the chief executive officer and Berry will be chief
operating officer. Time Warner President Richard Parsons and EMI
Group's Chairman Eric Nicoli, will be co-chairman.
The merger comes at a crucial time for Warner and EMI.
Warner Music's earnings fell from $288 million in the first nine months
of 1998 to $279 million for the same period in 1999. EMI has been
recovering from difficulties of its own, but in the six months ending
in September last year, profits were up by 61 percent to $108 million
compared to the same period the year before.
By linking their operations, Warner EMI will shave $400 million in
costs over three years, the source said.
Copyright 1999 Associated Press, All rights reserved.
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