Bad News For BMG: EU Merger Review Drags And Despite New Bids Publishing Sale Could Snag

Despite a soaring bidding war for its publishing unit, Bertelsmann was dealt a double whammy this week as EU regulators said that the Sony BMG merger hearings could extend for months and the same trade group that challenged the merger is now opposing the sale of BMG’s publishing unit.

The EU Commission had originally said that Sony and BMG needed to resubmit within seven days of the court ruling so that it can decide on the merger again. Now it has clarified that Sony BMG needs to give the Commission updated market information i ncluding market share and gave no specific deadline for this.

The combined Sony BMG has fallen 3-4% since the merger making claims of dominance less clear.  But the effect on Sony and BMG as well as others like EMI and WMG who were considering a merger or buy-out has been chilling.

Some good news for Bertelsmann came as it narrowed the field in bidding for its BMG publishing unit. Warner Music Group and Venture Capitalist BC Partners are two left standing as bidding reaches round two, but two others appear to be making even stronger bids. 

EMI has joined forces with US private equity group Kohlberg Kravis Roberts in the auction according to the London Times. And Vivendi Universal has upped their bid close to $2 billion USD according to published reports. This would be well above the $1.5 billion that analysts expected.

But the same European trade group that successfully challenged the Sony BMG merger in court says that celebration at BMG German HQ would be premature. Impala, which represents small labels and music publishers, was quoted by the Financial Times as saying it believed that the sale of BMG assets to any of its competitors "would strengthen existing collective dominance in publishing (and) would be unable to obtain regulatory approval."